Continuing a cryptocurrency oversight program begun in 2018, on July 18, 2019, FINRA issued Regulatory Notice 19-24. Under Notice 19-24, FINRA has requested that broker-dealers notify their FINRA Regulatory Coordinator if the member firm, or its associated persons or affiliates, engages, or intends to engage, in activities related to digital assets, including digital assets that are not securities.
The types of activities of interest to FINRA if undertaken (or planned) by a member, its associated persons or affiliates include:
- purchases, sales or executions of transactions in digital assets;
- purchases, sales or executions of transactions in a pooled fund investing in digital assets;
- creation, management or provision of advisory services for a pooled fund related to digital assets;
- purchases, sales or executions of transactions in derivatives (e.g., futures, options) tied to digital assets;
- participation in an initial or secondary offering of digital assets (e.g., ICO, pre-ICO);
- creation or management of a platform for the secondary trading of digital assets;
- custody or similar arrangement of digital assets;
- acceptance of cryptocurrencies (e.g., bitcoin) from customers;
- mining of cryptocurrencies;
- recommendation, solicitation or acceptance of orders in cryptocurrencies and other virtual coins and tokens;
- displaying indications of interest or quotations in cryptocurrencies and other virtual coins and tokens;
- providing or facilitating clearance and settlement services for cryptocurrencies and other virtual coins and tokens; or
- recording cryptocurrencies and other virtual coins and tokens using distributed ledger technology or any other use of blockchain technology.
FINRA encourages member firms to continue keeping their Regulatory Coordinators abreast of these activities until July 31, 2020. FINRA and the SEC staff also recently issued a Joint Statement on broker-dealer custody of digital assets, and Notice 19-24 underscores regulators’ continued interest in broker-dealer activity in the digital asset space.