The United States Securities and Exchanges Commission (SEC) in conjunction with the Financial Industry Regulatory Authority (FINRA) on Monday released a notice regarding broker-dealer custody of digital asset securities.
The guidance is reportedly the answer to questions raised by market participants regarding whether the U.S federal securities laws and FINRA requirements apply when an entity is dealing with digital assets like cryptocurrencies.
In its reply, the SEC confirmed that market participants must abide by the relevant securities law even when they’re dealing with cryptocurrencies.
Among other securities law that applies to broker-dealers, the SEC singled out the customer protection rule as one that market participants must comply with, given the excellent results the practice has produced for near 50 years.
Regarding that 50-year record, the SEC wrote,
“This record of protecting customer assets held in custody by broker-dealers stands in contrast to recent reports of cybertheft, and underscores the need to ensure broker-dealers robust protection of customer assets, including digital asset securities.”
Meanwhile, as Reuters noted in its coverage of this development, the new clarification by the SEC on how individuals and organization can custody digital assets could pave the way for “more traditional investors to hold digital asset securities.”
Entities that want to go into the business, now know they must apply for a license before launching any related-product while firms already registered as broker-dealers can feel free to custody digital asset securities in line with securities laws.
In a related development, we reported earlier this year that U.S Rep Warren Davidson and other lawmakers are pushing to exempt cryptocurrencies from securities laws, in a bid to encourage the rapid development of the industry.