Whenever you purchase a cryptocurrency like Bitcoin or Ethereum from a trade, it is crucial to understand that that’s an investment like any other stocks and other securities. A cryptocurrency is purchased for a price, left to grow in value, and later sold for profits. So, since cryptocurrencies are investments, they could as well be subject to numerous rules and regulations by the Financial Industry Regulatory Authority (FINRA) in one way or another.
So, if you are wondering if FINRA could one day oversee crypto trading, then this article is meant for you. Kindly consider reading on!
1. FINRA Wants Brokers to Disclose all Crypto Dealings
To monitor cryptocurrency activities, FINRA has stepped up rules and regulation requirements for all cryptocurrency brokerages. As a cryptocurrency broker, you are required to disclose your current or prospective cryptocurrency-related dealings. That way, Wall Street will be able to protect the public from cryptocurrency-related exploitations or frauds.
If you feel that a broker has violated the rules or given you a raw deal, this means that a FINRA arbitration lawyer can help resolve the dispute. However, arbitration and mediation through alternative dispute resolution (ADR) work best where there is an agreement between the broker and the investor.
2. Do Cryptocurrency Dealers Need FINRA Certification?
Yes, they do. Whether you like it or not, you need proper certification by FINRA for you to act as a broker-dealer of securities in the United States. While the Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) enforce the rules, certifying, and registering all security broker-dealers, it is FINRA that sets the licensing standards. Therefore, as a cryptocurrency broker, you will most likely need FINRA certification.
Additionally, FINRA provides useful resources such as BrokerCheck and databases to help potential investors verify the identity and reputation of a particular broker or dealer before making an investment decision. So, if you are looking forward to getting into cryptocurrency investment, don’t entrust anyone with your hard-earned money blindly. Before you do that, be sure to check out the resources provided by FINRA and the SEC EDGAR database.
3. How FINRA Regulates Cryptocurrencies
Primarily, FINRA regulates the financial professionals that work with stocks, securities, and any other related investment rather than the securities themselves. In that regard, FINRA might not be regulating cryptocurrency directly. Rather, it oversees the professionals involved in the cryptocurrency financial industry.
FINRA aims at helping cryptocurrency investors to invest safely. It educates investors, making them vigilant of cryptocurrency scams and investment frauds. That way, any potential cryptocurrency investor can make an informed decision before handing over his/her money to a cryptocurrency broker.
FINRA also emphasizes checking to validate that a particular cryptocurrency dealer is registered and certified. Otherwise, if fraud occurs, it may be difficult for FINRA to hold them accountable.
4. FINRA Can Help with Cryptocurrency Fraud Claims
While investing in any digital currency, you may be prone to a breach of contract by your broker, fraud, unsuitable investments, and any other related problems that might harm your investment. However, provided that your crypto broker was fully registered by FINRA, then FINRA can help you hold them accountable. If an investor is violated, he/she can file a claim against the broker or financial advisor via FINRA’s process of arbitration, which we briefly mentioned above. The FINRA’s rules set through SEC, state laws, federal laws, and other professional regulations are used to determine the type of fraud and the amount of damage the broker has to pay.
As highlighted in this article FINRA’s job is primarily to regulate the financial professionals that work with stocks and securities. They do not directly regulate the securities themselves. However, with the increasing popularity of cryptocurrencies and the subsequent increase in fraudulent deals, perhaps FINRA could one day step in and regulate the trade of today’s virtual currencies. The only way to find out is to wait and see.