The American government is stepping up in its objective to monitor cryptocurrency activities, and it wants everyone to cooperate with it as well. The Financial Industry Regulatory Authority (FINRA), America’s broker-dealer watchdog, published a Notice instructing member firms to disclose current or prospective cryptocurrency-related activities.
Nothing New Here
According to FINRA, the new measures are nothing new. The watchdog alluded to its past dealings with members, querying them and their affiliates on existing or expected relationships with digital assets. The authority reminded such companies that a July 31 deadline had been set for communications while imploring companies that are yet to do so to make their intentions known.
The full outline of the notice solicited that all FINRA-registered firms & brokers should communicate with the authority concerning all crypto-related activities, including the “purchase, sales, or executions transactions” done in crypto assets, investment in crypto-focused pooled funds, as well as investments in derivatives tied to crypto.
More Regulations on Crypto?
The FINRA’s request is coming at a time when the regulation of crypto assets is a hot button issue in Washington. All eyes have been on the crypto industry since Facebook announced Libra. Following the litany of criticisms that the social media giant has endured for this move, many have ridden on this wave to call for regulations on the crypto industry.
This has led to a rallying cry from both sides of the divide but those who oppose cryptocurrencies have been the loudest. From financial experts to lawmakers, everyone has an opinion about why cryptocurrencies should be put on a long leash.
Even President Donald Trump spoke about cryptocurrencies for the first time, though it was nothing positive. Trump had tweeted that he wasn’t a fan of digital assets, highlighting their volatility and susceptibility to criminal activities.
Echoing the thoughts of his boss, U.S. Treasury Secretary Steve Mnuchin alluded to Mr. Trump’s concerns in a press conference, “This is indeed a national security issue. Cryptocurrencies such as Bitcoin have been exploited to support billions of dollars of illicit activity like cybercrime, tax evasion, extortion, ransomware, illicit drugs, and human trafficking.”
Mnuchin’s comments suggested that the United States government might be looking to regulate digital assets and that the regulatory steps might not be palatable for crypto investors or companies within the industry. The FINRA’s request is also somewhat peculiar, given that it seems to be failing at the regulatory compliance task that was assigned to it. Earlier this month, the authority, along with the U.S. Securities and Exchange Commission (SEC), published an announcement detailing the difficulties they’ve encountered with ensuring regulatory compliance with crypto custody services.
In the announcement, the agencies revealed that they’ve yet to discover instances where crypto custody services could comply with the SEC’s Customer Protection Rule. In addition to that, they expressed doubts over the ability of a custody service to prove that it controls the assets it supposedly holds, as well as their ability to reverse unauthorized transactions.
Companies would most likely be inclined to comply with its request to disclose any current or prospective crypto activities, but there’s also a question of why it wants this information in the first place, and what it intends to do with them.