In an announcement on July 8, FINRA (The Financial Industry Regulatory Authority) and the SEC (The United States Securities and Exchange Commission) issued a public statement on regulatory compliance issues for cryptocurrency custodians.
It was a joint statement where the organizations stated that they are yet to discover a set of circumstances in which a cryptocurrency holder could comply with the SEC’s Customer Protection Rule, stated below:
“Put simply, the Customer Protection Rule requires broker-dealers to safeguard customer assets and to keep customer assets separate from the firm’s assets, thus increasing the likelihood that customers’ securities and cash can be returned to them in the event of the broker-dealer’s failure.”
The report further adds that a crypto custody service may not be able to properly demonstrate that it actually controls the assets it may claim to hold.
The SEC and FINRA talk mainly about how holding a private key are not sufficient to demonstrate ownership of crypto as any other person could gain access to that key and perform transactions that are not approved by the intended owner.
What makes matter worse is that if such a transaction did occur, the custodian would not be able to reverse that transaction by simply holding that private key. The statement adds that the same logic would also apply more generally to any transactions that the owner of the asset might desire to cancel or reverse.
Based on reports by Cointelegraph, the SEC had previously requested for feedback in March on its propositions to regulate crypto settlements and the role of custodians in non-delivery versus payment trading and the safety mechanisms that are currently in place.
In addition to giving their take on custodial services, the report also goes into the issues for registering noncustodial services such as broker-dealer transactions and over-the-counter (OTC) platforms while also stating their concerns on liquidation the bookkeeping policies via the Securities Investor Protection Act.
The SEC and FINRA had previously scheduled a broker-dealer meeting in Chicago for June 27 with a goal to discuss “regulatory hot topics” including cybersecurity and cryptocurrencies.
The Future of Cryptocurrencies relies heavily on how these regulations will come into play eventually. This year showed a huge rise in the popularity of Cryptocurrencies as well as the value of these digital assets. However, all of this can end up meaning nothing if regulations continue to cripple the fastly growing industry.
Follow us on Twitter, Facebook, Steemit, and join our Telegram channel for the latest blockchain and cryptocurrency news
In order to support and motivate the CryptoTicker team, especially in times of Corona, to continue to deliver good content, we would like to ask you to donate a small amount. Independent journalism can only survive if we stick together as a society. Thank you
Nexo - Your Crypto Banking Account
Instant Crypto Credit Lines™ from only 5.9% APR. Earn up to 8% interest per year on your Stablecoins, USD, EUR & GBP. $100 million custodial insurance.
Trading Bitcoin is too complicated?
We highly recommend our Crypto-Starter-Kit to you!
Or are you looking for the current Bitcoin Price in USD? Look no further!
Bitcoin Price, Ethereum Price, Ripple Price
This post may contain promotional links that help us fund the site. When you click on the links, we receive a commission - but the prices do not change for you! :)
Disclaimer: The authors of this website may have invested in crypto currencies themselves. They are not financial advisors and only express their opinions. Anyone considering investing in crypto currencies should be well informed about these high-risk assets.
Trading with financial products, especially with CFDs involves a high level of risk and is therefore not suitable for security-conscious investors. CFDs are complex instruments and carry a high risk of losing money quickly through leverage. Be aware that most private Investors lose money, if they decide to trade CFDs. Any type of trading and speculation in financial products that can produce an unusually high return is also associated with increased risk to lose money. Note that past gains are no guarantee of positive results in the future.
You might also like
More from Regulation
Can Cryptocurrency be Regulated?
Cryptocurrency market is relatively new and still maturing. Its largely unregulated currently, which is why its heavily manipulated. Even though, …
Indian Police get special training to identify crypto scams
With the release of new products like Libra from big companies like Facebook, there is a sense of urgency among …
FATF: All Global Crypto Exchanges Must Now Share Customer Data
FATF (Financial Action Task Force), an intergovernmental organization whose role is to combat money laundering and terrorism financing has presented …