FINRA Extends Deadline for Firms to Report Crypto Activity

Amid the kerfuffle last week over Facebook's Libra cryptocurrency project and its potential regulation, the U.S. Financial Industry Regulatory Authority (FINRA) quietly extended its deadline for firms to report their crypto activity.

The self-regulatory body for brokerages and exchanges had last year requested (it says "encouraged") that member companies inform their regulatory coordinator if the firm or associated individuals or affiliates, "engaged, or intended to engage, in activities related to digital assets." The request included "digital assets that are non-securities" – that is, cryptocurrencies like bitcoin.

With the deadline for that notice expiring on July 31, FINRA posted a follow up late last week, extending the deadline until the same date in 2020.

The new notice explains that:

"As securities regulators continue to provide guidance to members regarding the unique regulatory challenges presented by digital assets – e.g., Joint Statement on Broker-Dealer Custody of Digital Asset Securities – FINRA believes it is important to keep the lines of communication with members open on this important topic."

Activities that FINRA suggests should be reported include buying, selling and transacting in digital assets, ICOs, crypto derivatives or funds investing in digital assets. Among others, it also lists offering advisory services or pooled funds, offering trading or custody services, mining cryptocurrencies and accepting cryptocurrencies as payment.

Any use of blockchain technology is also worthy of reporting, the authority said.

Earlier this month, FINRA and the Securities and Exchange Commission (SEC) jointly said there are a number of questions to be addressed before they can approve crypto companies’ applications to become broker-dealers.

One factor is whether the assets are treated as securities under the Securities Investor Protection Act (SIPA) of 1970.

“The ability of a broker-dealer to comply with aspects of the Customer Protection Rule is greatly facilitated by established laws and practices regarding the loss or theft of a security, that may not be available or effective in the case of certain digital assets,” a statement said.

Another issued is that, while a broker can prove that it possesses the private keys to a crypto wallet, it would be difficult to prove that no other entity does, according to the agencies.

FINRA image via Shutterstock