According to Coindesk's July 9 report, the US Securities and Exchange Commission (SEC) and the Financial Supervisory Authority (FINRA) said there are still many issues to be resolved before they approve cryptocurrency companies to become brokers.
(Source: flickr )
On Monday, the SEC's Trade and Markets Department and the Office of the Legal Adviser of the US Financial Industry Regulatory Authority outlined the different factors that organizations consider when deciding whether to approve companies that apply for digital assets, including custody, and digital assets. Whether it is considered a security under the Securities Investor Protection Act (SIPA).
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The statement stated:
The established laws and practices regarding the loss or theft of securities have prompted brokers to better comply with customer protection regulations, which may be unavailable or ineffective when considering certain digital assets.
US brokers are legally registered and regulated entities that can represent and sell securities on their own behalf. Some companies want to use digital assets as securities, allowing them to market to institutional investors who cannot hold or buy them directly.
The statement said that although brokers can prove that they have the private key of the cryptocurrency wallet, it is difficult to prove whether other entities have the private key of the wallet. The statement explains:
The cryptocurrency company may not be able to prove whether the other party has a copy of the private key, and it cannot prove that the other party transferred the digital asset without the consent of the broker.
According to the document, the joint statement issued this time is a response to questions raised by market participants.
CoinDesk has previously reported that companies that have applied for brokerage approval have been in trouble, and some companies have waited more than a year after submitting their applications to brokers.
Many of these companies claim that the US Securities and Exchange Commission has suspended the approval of brokerage firms involved in digital asset companies, while others have said that cryptocurrency-based securities pose new problems that regulators must first assess. The joint statement on Monday seems to confirm the inference of the latter.
The cryptocurrency exchange Gemini is the latest company approved by a broker-dealer.
In addition, the US Securities and Exchange Commission and the Financial Supervisory Authority also discussed that digital assets may not meet the requirements of the Securities Investor Protection Act for digital securities.
Article 15c3-3 of the US Securities and Exchange Commission stipulates that “requires brokerages to actually hold full payment and excess margin for customers”. Normally, the securities required by the Securities Investor Protection Act have safeguards for cancellation, cancellation, and unauthorized transactions, and the third party custodian actually holds the securities.
However, when it comes to digital assets, the use of third-party custodians may increase the risk of stolen or lost securities. The statement stated that if these securities were transferred to an unauthorized address, the relevant brokers would not be able to cancel the transaction.
The statement added:
If the digital asset securities do not meet the definition of 'securities' under the Securities Investor Protection Act, and if there is a problem with the brokerage carrier, then the Securities Investor Protection Act may not apply to these situations.
Other issues mentioned in the statement are primarily related to record keeping and reporting rules.
Specifically stated in the statement:
The nature of distributed ledger technology and the characteristics associated with digital asset securities may make it difficult for brokers to prove whether their digital asset securities are from brokerage-controlled books, records, financial statements or timetables.
Some digital asset companies are planning to use distributed led books with specific features designed to meet their record keeping requirements, but these companies must still "consider the nature of the technology may affect their better compliance with regulatory rules."