The U.S. Financial Regulatory Authority (FINRA) announced on July 22 that they are extending a deadline for firms to report their crypto activity. This, following some confusion regarding Facebook’s Libra.
FINRA had set a July 31 date of when firms were to report their current or expected activity related to digital assets. This deadline required that they were to report to the regulatory coordinator any individual or affiliate within the organization who was “engaged, or intended to engage, in activities related to digital assets.” This included digital assets that are non-securities.
However, in a new post issued late last week, FINRA extended the deadline to July 31, 2020. In the statement, the regulatory agency explained:
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.
The primary confusion seems to be surrounding what is considered a security. The Securities Investor Protection Act of 1970 governs the classification system, but that has not been updated to address digital assets. The statement explained that 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,” but those laws appear to be antiquated in relation to this digital age.
In addition, congressional leaders seem to be taking a distressed eye upon one of the newest digital currencies, Libra. At a congressional hearing held in the Senate two weeks ago, many senators showed doubt that Facebook could be trusted.
Calibra executive David Marcus explained the company’s “first goal is to create utility and adoption, enabling people around the world—especially the unbanked and underbanked—to take part in the financial ecosystem.”
However, that did not seem to quell the concerns of many, who pointed out that continual data breaches and an inability to protect customer privacy has become a sore spot for Facebook over the last two years.
It finally appears that Congress is ready to take action to improve the privacy of consumers, while also making modifications to the 1970 regulations. However, anyone watching congressional proceedings knows that the wheels of the legislative body of the U.S. move slowly, almost glacially.
If Congress does not act, odds are good that FINRA may be extending the deadline again.
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