SEC to Keep Close Watch on Crypto Brokers and Advisers

The United States Securities and Exchange Commission will bring into compliance this year all cryptocurrency brokers and financial advisers who provide or advise on cryptocurrencies.

The Division of Examinations of Securities and Exchange Commission (SEC), released a statement on February 7th. It outlined its priorities in 2023. Brokers and advisors who trade in cryptocurrency should exercise greater caution when selling, buying, or giving recommendations about digital assets.

SEC-registered advisors and brokers would be closely monitored to ensure that they adhere to their “respective standard of care” when offering financial advice, making referrals, or making recommendations to clients.

The Securities and Exchange Commission will also examine whether these organizations regularly evaluate and update their processes to ensure that they are adhering to “compliance and transparency” and “risk management policies.”

The announcement was similar to those made by the SEC in 2022. However, it seems that the regulator this year is putting more emphasis on standards of care and practices of brokers than the consideration of unique risks presented “emerging technology,” as was the case in 2022.

After a report that indicated that the SEC was investigating registered investment advisors who may be providing digital asset custody to customers without the necessary credentials, the most recent statement was published. This article was published nearly two weeks after the last statement.

According to Reuters, while the investigation underway by the SEC appears to have been ongoing for a number months but was elevated to the top after the failure to operate the cryptocurrency exchange FTX.

The 1940 Investment Advisers Act states that to be eligible to offer custody services to customers, investment advice firms must adhere to the custodial precautions set forth in that act.



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