The Financial Industry Regulatory Authority (FINRA) has introduced a comprehensive section on its website dedicated to cryptocurrency.
This new resource provides detailed information on the classification of crypto assets, the risks involved in trading them, and relevant investor protections.
Classifications of Crypto Assets
One key feature of the new FINRA section is a focus on the legal status of crypto assets. FINRA explains that, depending on applicable laws, certain cryptocurrencies may qualify as securities, commodities, or other asset types.
While the term “crypto asset security” is not used explicitly, except in reference to a 2023 SEC Investor Alert, the authority stresses that some crypto assets or transactions may meet the federal definition of a security under U.S. securities laws.
The section clarifies that whether a crypto asset is considered a security depends on legal definitions and tests, such as the Howey Test and Reves Test, which are based on prior court decisions. These tools help determine whether an asset meets the criteria for a security under federal law.
FINRA also emphasizes that the regulatory framework for crypto assets remains incomplete and that many crypto transactions lack the protections typically afforded by securities laws.
Eleanor Terrett, FOX Bussines News correspondent, called attention to this development from FINRA in a post on X.
🚨NEW: @FINRA has added a new section on #crypto to its website. While there is no mention of the term “crypto asset security” (except in a link to a 2023 @SECGov Investor Alert in the ‘Learn More’ section), FINRA still notes that a crypto asset itself can be considered a… pic.twitter.com/Nnq8DbPyT0
— Eleanor Terrett (@EleanorTerrett) November 22, 2024
Understanding the Risks of Crypto Assets
FINRA also delves into the risks associated with crypto assets, detailing how they can differ from traditional securities or commodities. The agency highlights that crypto transactions may not benefit from robust regulatory frameworks, exposing investors to potential vulnerabilities.
To support informed decision-making, FINRA offers links to resources from other regulatory agencies, including the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC).
Moreover, FINRA’s crypto section includes links to educational materials and resources. These resources provide insights into the processes of buying and selling crypto assets while offering strategies for understanding associated risks.
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