While cryptocurrency allows users to remove the middleman, some investors still rely on their brokers to ensure that their assets are safe. The Securities Exchange Commission (SEC) is now looking at this relationship and just how involved these intermediaries actually are.
The only way to make a well-informed decision about anything is by questioning it while making sure that you’ve gathered all of the facts.
This appears to be exactly what the SEC is doing. According to Bloomberg, brokerages have found themselves in the regulator’s spotlight. The latter is looking at issues such as trading fees and the level of assistance that these financial advisers provide.
KNOWLEDGE IS POWER
One the face of it, it may seem like the SEC is poking around and trying to cause issues but in reality, it might be the opposite. The regulator is simply doing their due diligence in understanding the industry as best as it can.
John L. Jacobs gave his point of view on the SEC’s quest for clarity. Jacobs, who is the executive director of the Center for Financial Markets and Policy at Georgetown University, said:
They’re trying to understand the whole ecosystem. They’re still wrestling with how to make sure that this an organized efficient marketplace.
SECURITIES EXCHANGE COMMISSION REQUIRES TOTAL TRANSPARENCY
This process of review is being conducted by the Office of Compliance Inspections and Examinations (OCIE), the results of which will be passed on to the SEC for further investigation if warranted. The former has previously discussed how these brokers or advisors need to protect their clients’ funds:
The cryptocurrency and ICO markets have grown rapidly and present a number of risks for retail investors. Areas of focus will include, among other things, whether financial professionals maintain adequate controls and safeguards to protect these assets from theft or misappropriation.
Anonymous sources with knowledge of the recent review went on to explain that firms have been previously requested to advise the SEC if and when they engage in any kind of crypto-related business. Some businesses have been adhering to the new requirements and even taking their own initiative and actively seeking the advice of the SEC.
Jeff Bandman, principal at Bandman Advisors, touched on this a bit:
This seems to be transitioning from where the house is on fire to incorporating supervision of the intermediaries.
As the market remains largely unregulated, these firms sometimes require the SEC to provide insight on whether or not their clients’ assets are in fact securities. Getting this wrong could result in legal action taken against these entities.
Interested ETF parties are most likely hoping that the Securities Exchange Commission has a clear understanding of all things crypto before next month. With a history of saying no, crypto ETF enthusiasts are hoping for a yes come September.