American Self-Regulatory Body Addresses Crypto Compliance Risks
The Financial Industry Regulatory Authority (FINRA) has released its annual oversight report, which now includes considerations for crypto-related compliance. The self-regulatory body has directed companies to pay more attention to the growing risks associated with cryptocurrencies and to enhance due diligence on activities involving digital assets.
Assessing Compliance with SEC Rules
FINRA, which operates under the regulation of the US Securities and Exchange Commission (SEC), has mandated its member firms, which include securities broker-dealers, to assess their crypto securities business line to ensure compliance with SEC rules. Member firms have also been asked to complete a questionnaire regarding their activities in the crypto asset space.
Cybersecurity Concerns and Market Manipulation
In its report, FINRA highlighted various cybersecurity trends, such as imposter websites and ransomware, that member firms need to be aware of. The report also noted that bad actors are taking advantage of investor interest in cryptocurrencies by engaging in market manipulation schemes like pump and dump. FINRA has identified individuals involved in activities such as proprietary trading, operating crypto investment funds, and crypto mining operations.
Potential for Stringent Legislation
FINRA’s focus on crypto compliance aligns with recent actions taken by the SEC to increase supervision over the asset class and the broader crypto industry. This could potentially lead to more stringent legislation in the future to mitigate new and existing threats.
Hot Take: Crypto Compliance Risks Highlighted by FINRA
The Financial Industry Regulatory Authority’s annual oversight report emphasizes the emergence of compliance risks in the crypto industry. With growing interest in cryptocurrencies and digital assets, companies must pay closer attention to regulatory challenges and enhance due diligence. FINRA has mandated its member firms to assess their crypto securities business line and complete a questionnaire on their activities in the crypto asset space. The report also highlights cybersecurity concerns and market manipulation schemes targeting investors. These developments align with the SEC’s efforts to increase supervision over the crypto industry, potentially leading to stricter regulations in the future.
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