FINRA Continues to Encourage Firms to Notify FINRA if They Engage in Activities Related to Digital Assets
For the past several years, FINRA has encouraged firms to keep their risk monitoring analyst informed if the firm, or its associated persons or affiliates, engaged, or intended to engage, in activities related to digital assets, including digital assets that are non-securities (See Regulatory Notices 18-20 (July 2018), 19-24 (July 2019) and 20-23 (July 2020)).
Since 2018, FINRA has sought to engage in an ongoing dialogue with member firms regarding their current and planned activities relating to digital assets. These efforts have included a survey of firms’ current and planned activities related to digital assets, as well as through the publication of Regulatory Notices requesting that each firm keep its risk monitoring analyst informed of new or planned activities regarding digital assets, including cryptocurrencies and other virtual coins and tokens (whether or not they meet the definition of “security” for the purposes of the federal securities laws and FINRA rules).
As the area of digital assets continues to evolve and present unique regulatory challenges, FINRA believes it is important to keep the lines of communication with members open. As a result, FINRA is issuing this Regulatory Notice 21-25 to encourage each firm to continue to keep FINRA up to date on the firm’s new activities and planned activities relating to digital assets not previously disclosed. Therefore, 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 associated persons (including activities under Rules 3270 and 3280), or affiliates, currently engages, or intends to engage, in any activities related to digital assets. As a reminder, the types of activities of interest to FINRA if undertaken (or planned) by a member, its associated persons or affiliates, include, but are not limited to:
purchases, sales or executions of transactions in digital assets;
purchases, sales or executions of transactions in a pooled fund investing in digital assets;
creation of, management of, 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;
recommend, solicit or accept orders in cryptocurrencies and other virtual coins and tokens;
display indications of interest or quotations in cryptocurrencies and other virtual coins and tokens;
provide or facilitate 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 firms to promptly notify their risk monitoring analyst in writing (including email) of these types of activities on an ongoing basis. If a firm already has submitted a continuing membership application (CMA) regarding its involvement in activities related to digital assets, or has otherwise provided this information to FINRA, additional notice is not requested unless a change has occurred.
The full FINRA Regulatory Notice 21-25 document can be viewed here.
