FINRA Urges Firms to Disclose Digital Asset Activities

The market for digital assets has grown significantly and has increasingly been of interest to retail investors. As a result, on July 6, 2018, FINRA released Regulatory Notice 18-20, which encourages member firms to promptly notify FINRA if the firm or its associated persons intend to engage in activities involving digital assets, such as cryptocurrencies and other virtual coins and tokens.

The types of activities of interest to FINRA include:

  • 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.

Until July 31, 2019, FINRA members should keep their Regulatory Coordinators informed of the digital asset activities of the firm, as well as the firm’s associated persons or affiliates that were not previously disclosed—although this is also voluntary. Unless a change in such activities has occurred, FINRA is not requesting additional notice from those members who have already disclosed digital asset activities pursuant to a direct request, via the 2018 Risk Control Assessment Survey or through a continuing membership application.

To read the complete Regulatory Notice, click here.