The SEC announced an enforcement settlement for $100 million in fines and penalties related to BlockFi Lending LLC, a digital asset borrowing and lending platform. The SEC found that BlockFi offered unregistered securities to U.S. investors, made material misrepresentations about its lending activities, and operated as an unregistered investment company.

Crypto assets, including so-called cryptocurrencies, stablecoins, tokens, and other digital assets have been of increasing interest to retail investors over the last few years.  This Investor Bulletin highlights the risks that may be involved in a recent financial product related to crypto assets—an interest-bearing account for crypto asset holdings. 

As was the case under Regulatory Notices 18-20, 19-24 and 20-23, FINRA asks that each firm promptly notify its risk monitoring analyst if it or its affiliates, currently engages, or intends to engage, in any activities related to digital assets. The Notice gives examples of the types of activities of interest to FINRA if undertaken (or planned) by a member, its associated persons or affiliates.

The SEC has issued this Risk Alert with observations made by its staff during examinations of investment advisers, broker-dealers, and transfer agents regarding digital asset securities that may assist firms in developing and enhancing their compliance practices.

The SEC’s Division of Trading & Markets issued a first of its kind Statement on the custody of digital asset securities that allows clearing broker-dealers to mitigate the risks of custody of a security on a DLT network and comply with SEC Rule 15c3-3.

The Commodity Futures Trading Commission released a Digital Assets Primer to provide updated information to the public about emerging concepts in digital assets.

The SEC’s Division of Trading and Markets issued a no-action letter to FINRA, authorizing an amended settlement process for alternative trading systems (ATSs) in the settlement of digital asset security trades. The SEC staff endorsed a three-step settlement process for digital asset securities held in a third-party’s custody if certain customer-protection conditions are met.

The SEC and FINRA issued a Joint Statement discussing several provisions of the federal securities laws applicable to registered broker-dealers that may be implicated when such entities custody digital asset securities, including the Customer Protection Rule, various non-custodial broker-dealer models for digital asset securities, broker-dealer custody of digital asset securities, books and records and control location.

Having seen significant advances in technologies in recent years – including blockchain and other distributed ledger technologies – that impact our securities markets, this SEC’s statement from multiple Divisions highlights several recent SEC enforcement actions involving the intersection of long-standing applications of our federal securities laws and new technologies.