Last week, I posted a blog about the SEC’s increased focus on cryptocurrency and ICOs in the coming year. It looks like that scrutiny will not be limited to the SEC. In its 2018 Annual Regulatory and Examination Priorities Letter, the Financial Industry Regulatory Authority (FINRA) confirmed that Initial Coin Offerings (ICO’s) and Cryptocurrencies will be among its priorities. FINRA is not a government agency, but rather a self-regulatory organization (SRO), like NASDAQ or the New York Stock Exchange, which is “dedicated to investor protection and market integrity through effective and efficient regulation of broker-dealers.” And while FINRA is not a regulatory body like the SEC, it still writes and enforces rules that govern the activities of broker-dealers. In its most recent annual regulatory and examination priorities letter, FINRA vows to “closely monitor developments in this area, including the role firms and registered representatives may play in effecting transactions in such assets and ICOs.”
While the increased attention is noteworthy, it is worth noting that FINRA’s concern with cryptocurrency is hardly new. Given the market’s enthusiasm for cryptocurrency, the organization’s prioritization is hardly surprising, especially considering its recent alert cautioning investors against cryptocurrency-based scams. FINRA previously restricted its efforts to cautioning investors about the perils of cryptocurrencies and ICOs.
This follows an international trend of increased government regulation of cryptocurrency. Chinese officials have also announced plans to limit cryptocurrency trading, and South Korea made a similar announcement last month. So far, India has only issued warnings about the possible risks associated with trading in cryptocurrency, likening it to a Ponzi scheme. Needless to say, this is a very active and volatile industry that regulators are trying to better understand and monitor. Many speculate that plans for increased governmental regulation are to blame for the recent 20% plunge in Cboe bitcoin futures. True or not, one thing is for certain in 2018: regulators and other government agencies will be paying close attention to this industry.