FINRA Extends the Deadline for Startups to Make Reports of their Digital Assets Engagement

The Financial Industry Regulatory Authority, FINRA, is reported to have extended their deadline for startups to make reports on their engagement activities regarding digital assets. 

FINRA requested the member companies to ensure that they informed the regulatory coordinator if they engaged or planned to operate with digital assets last year. This is inclusive of all digital assets, even the none securities like cryptocurrencies. The deadline for startups to make these updates was set on 31st of July, 2019 but has now been moved to 31st of July 2020.

FINRA has a list of digital assets activities that they require to be reported, including the buying, selling or transacting in digital assets, investing of funds in cryptocurrency, any use of blockchain technology, ICOs, pooled funds and other activities that regard digital assets. FINRA is also offering other services such as mining crypto, trading crypto, advisory services, and also accept cryptocurrency as payment.

FINRA is providing guidance to members regarding the problems associated with digital assets. At the beginning of this month, FINRA, in conjunction with SEC, stated that there would be several factors to consider before crypto companies’ applications can be approved to become broker-dealers. One of these factors is whether the assets are viewed as securities regarding the Securities Investor Protection Act, SIPA act, of 1970. 

Some laws and practices (for instance, the ones governing loss or theft of security) may not apply to some digital assets due to their nature. Therefore, a broker-dealer may choose to comply with the customer protection rule as facilitated by the established laws and practices.

Having extended the deadline for the member companies to make their reports, FINRA is now calling on to the firms to ensure that they continue to notify the regulatory coordinator as it is required of them. The concerned parties whose attention is required include: 

• The company or a person associated with the company 
• An affiliate to the company who is engaging or is planning to engage in activities concerning digital assets

This information is only intended for the startups that had not previously reported. However, if a company has submitted a continuing membership application to CMA with the regard of digital assets involvement or has already made a report to FINRA, then an additional report is not necessary.