Crypto assets—also known as digital assets—are assets that are issued or transferred using distributed ledger or blockchain technology. They include, but are not limited to, so-called “virtual currencies,” “coins,” and “tokens.” A particular crypto asset may or may not meet definition of a “security” under the federal securities laws.FINRA rules that relate to securities, or that do not depend on securities status, may impose obligations on the crypto asset-related activities of member firms and associated persons.
In Regulatory Notices20-23 (July 2020) and21-25 (July 2021), FINRA encouraged member firms to notify FINRA if they or their affiliates engage in, or plan to engage in, activities related to crypto assets, including crypto assets that are not securities.
As a result of our outreach and other efforts, FINRA has identifiedmember firms with direct or indirect touch points to crypto asset-related activities. These include firms engaged in private placements of crypto asset securities, the operation of Alternative Trading Systems (ATSs) for crypto asset securities, and the operation of Special Purpose Broker-Dealers (SPBD) pursuant to the Securities and Exchange Commission’s December 2020 statement,Custody of Digital Asset Securities by Special Purpose Broker-Dealers (SPBD Statement). Other member firms have engaged in proprietary trading of crypto assets or distributed ledger technology initiatives for traditional securities or have established relationships with affiliates or other third parties to provide their customers with access to crypto asset-related products and services.
Associated persons have also engaged in a range of crypto asset-related activities through outside business activities (OBAs) or private securities transactions (PSTs), including PSTs for compensation that impose additional supervisory requirements on firms pursuant toFINRA Rule 3280(c).Examples include proprietary trading, operating investment funds that invest in crypto assets, selling private placements or crypto asset offerings, and participating in crypto mining operations.
A prospective member firm that intends to engage in crypto asset activities must seek approval for new FINRA membership through the submission of aNew Membership Application pursuant toFINRA Rule 1013. An existing member firm that is contemplating a material change in business operations—including a material crypto-related change in business operations—must submit aContinuing Membership Application(CMA) pursuant toFINRA Rule 1017. FINRA follows theSEC’s guidance—including theSPBD Statement,the Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities(July 8, 2019), and theNo-action Letter, ATS Role in the Settlement of Digital Asset Security Trades(September 25, 2020)—when assessing a firm’s proposed crypto asset business lines under applicable rules.
As crypto asset markets continue to evolve and new products and offerings become available to customers, FINRA will continue to adjust our regulatory program to address the crypto asset-related activities and conduct of member firms and associated persons for compliance with the securities laws and FINRA rules.To lead these efforts and ensure FINRA is prepared to fulfill our regulatory mission now and in the future, FINRA established the Crypto Hub, the Crypto Asset Investigations team (CAI), the Blockchain Lab (Lab), and the Crypto Asset Surveillance Team (CAST).
FINRA Continues to Encourage Firms to Notify FINRA if They Engage in Activities Related to Digital Assets
07/08/2021
FINRA Encourages Firms to Notify FINRA if They Engage in Activities Related to Digital Assets
07/09/2020
Guidance
As part of FINRA’s mission to protect investors and promote market integrity, we are focused on addressing the regulatory challenges presented by our member firms’ crypto asset activities. Crypto assets—also known as digital assets—are assets that are issued or transferred using distributed ledger or blockchain technology. They include, but are not limited to, so-called virtual currencies, coins, and tokens. A particular crypto asset may or may not meet the definition of a “security” under the federal securities laws.
August 13, 2024
Media Center
Last summer, we introduced listeners to FINRA’s Crypto Hub, an enterprise-wide strategy for keeping up with the evolving crypto asset regulatory landscape. On this episode, we have three members of the hub join us to provide an update on that work to dig into the results of a recent survey of member firms regarding their crypto asset touch points to tell us about the new spot Bitcoin ETP market and more.
July 23, 2024
Media Center
On this episode, we delve into the results of FINRA's targeted review of certain member firms and their communications to retail investors regarding crypto products and services.
January 23, 2024
Guidance
January 2024
January 23, 2024
Guidance
The Crypto Asset Developments topic of the 2024 FINRA Annual Regulatory Oversight Report (the Report) informs member firms’ compliance programs by providing annual insights from FINRA’s ongoing regulatory operations, including (1) regulatory obligations and related considerations, (2) findings and effective practices, and (3) additional resources.
January 09, 2024
Media Center
In this third and final episode in our series covering FINRA's ongoing crypto asset regulatory work, we hear from FINRA's Blockchain Lab, which serves as a central point within FINRA for the development of blockchain-related regulatory initiatives to learn about how the Lab is supporting and advancing FINRA's regulatory work involving crypto assets.
September 19, 2023
Media Center
In this second episode of a three-part series covering FINRA's crypto asset-related regulatory work, we hear from FINRA's Crypto Asset Investigations Team. This dedicated group of investigators specialize in conducting complex crypto asset investigations and share more about the crucial role it plays in ensuring compliance with existing rules and regulations in the crypto asset space.
September 05, 2023
Media Center
In 2022, FINRA developed an enterprise-wide strategy to ensure it is prepared for an evolving crypto asset regulatory landscape and created the Crypto Hub, the Blockchain Lab and the Crypto Asset Investigations Team. On this episode, the first in a three-part series, we learn more about the strategy and the role of the Hub.
August 08, 2023
Guidance
FINRA is conducting a targeted exam of firm practices regarding retail communications concerning Crypto Asset products and services.
November 14, 2022
Compliance Tools
An alternative trading system (ATS) is an SEC-regulated trading venue in which a computerized system matches buy and sell orders of securities. An ATS is not a national securities exchange, an ATS may apply to the SEC to become a national securities exchange. An ATS that registers as a broker-dealer must also comply with the obligations associated with being a registered broker-dealer, including FINRA membership and compliance with FINRA rules.
Compliance Tools
Activities relating to digital assets have attracted the interest of prospective and existing FINRA member firms. Digital asset securities with their related innovative technologies raise novel, complex and challenging regulatory and compliance questions, and challenges for both prospective and existing FINRA members.
January 23, 2024
May 10, 2023
Investor Insights
In relationship investment scams, fraudsters often hide their true identities, reach out to unsuspecting targets (often online or through text messages), gain their trust over time, and then defraud them through fake investments. These scams are sometimes referred to by terms including romance scams, “cryptocurrency” investment scams, financial grooming scams, and “pig butchering scams.” Learn more about these scams and red flags to watch for.
Investor Education
In investment-related impersonation schemes, scammers misuse the name of real registered investment professionals or firms to create the appearance of legitimacy. Imposter scams can be difficult to spot unless you know what you’re looking for. Here are patterns to be aware of and tips to help spot the fakes.
Investor Education
FINRA has seen a recent significant spike in investor complaints resulting from recommendations made by fraudulent “investment groups” promoted through social media channels. Complaints describe bad actors, posing as registered investment advisers, who advertise “stock investment groups” on Instagram and other social media channels and then turn to encrypted group chats on WhatsApp to communicate with interested investors and pitch investments.
Investor Education
Bitcoin is a peer-to-peer payment system that uses its own currency, called bitcoin, to transact business around the world. Bitcoins are not issued by banks or governments—indeed, the bitcoin platform was designed to offer an alternative to national currencies, like the dollar, and commodity-based currencies such as gold or silver coins.
Investor Education
If you own crypto assets, or are considering doing so, it’s valuable to have at least a basic understanding of blockchain, the technology protocol that powers most cryptocurrencies, including bitcoin and ethereum. Blockchain uses computer code to create, maintain and update information shared by blockchain participants.
Investor Education
Keeping crypto assets safe involves a different set of challenges than keeping your cash, stocks or bonds secure. It’s important to learn about the different ways to store crypto assets.
Investor Education
Cryptocurrencies and other digital assets are often in the news. Unfortunately, the volatile and often opaque world of crypto makes it a fertile environment for stock scams. Here are some tips to keep from falling prey to a crypto-related stock scam.
Investor Education
Don’t trust that unexpected text or direct message from a stranger—it might be the first step in a “pig butchering” scam. These scams often involve fraudsters contacting targets seemingly at random, then gaining trust before ultimately manipulating their targets into phony investments and disappearing with the funds.
Investor Education
Gen Z investors are a growing force of digitally savvy stakeholders who are making their entrance into the financial markets. They are attracted to investing by the wide dissemination of financial information on social media and other online platforms; the increasing ability to invest with small amounts, often on investing apps designed for their generation; the prevalence and popularity of cryptocurrency; the fear of missing out (FOMO) on a key opportunity to make money; and the substantial influence and assistance from their parents and other family members.
