A partial green-light for crypto inside Wall Street

There has always been a beef between the SEC and firms that deal with Cryptocurrencies. Prior to this many ICOs and exchanges have been shut down by the Securities and Exchange Commission. Just recently, Washington is said to be preparing itself to let cryptocurrency start-ups into Wall Street. The Securities and Exchange Commission said on Monday that any start-ups hoping to use the blockchain technology for uses such as raising capital could soon be able to do so under proper regulation, reports, The Wall Street Journal. The home to the world’s largest stock exchanges could soon shelter digital-asset brokers as well.

The crypto industry is surrounded by reports of scams and Ponzi schemes; this is one of the main reasons that governments all over the world are so reluctant about adapting this technology. With the likes of Australia and Singapore already a step ahead, others don’t want to be left behind. The report mentions that the firms that are hoping to provide complete brokerage services such as facilitating trades and holding customer securities have a long way to go because the government bodies are still not sure about the ability of the crypto industry to safeguard the customer’s assets from the attackers that have been looming around, also the common act of losing one’s private keys that act as the password as well as the proof of ownership.

According to reports, nearly two dozen companies are seeking to acquire approval as licensed brokerages. The biggest challenge for any firm right now is to convince the regulators that they are capable of safeguarding the customers’ assets in case the brokerage goes out of business. The SEC requires the use of regulated, third-party repositories to safeguard the client’s assets, but that is non-existent in the crypto industry.

Also recently, there was a joint statement put out by the SEC and the financial industry regulatory authority (FINRA). The statement was focused around the SEC’s consumer protection rule and how crypto custodian can comply or not comply with it. The SEC requires the use of regulated, third-party repositories to safeguard the client’s assets, when it comes to digital assets, using third-party custodians increases the risk of the securities being stolen or lost. No broker will be able to reverse a transaction if it goes to a wrong address.

“Put simply, the Customer Protection Rule requires broker-dealers to safeguard customer assets and to keep customer assets separate from the firm’s assets, thus increasing the likelihood that customers’ securities and cash can be returned to them in the event of the broker-dealer’s failure,” the statement mentioned. However, firms that limit their services to ones that don’t involve keeping custody of a client’s assets could be a part of the regulated industry soon. This would mean that the firms could provide services like helping a private company raise capital by connecting them to investors looking to buy digital-assets. “Noncustodial activities involving digital assets do not raise the same level of concern,” the SEC and the Financial Industry Regulatory Authority said in the statement.