FINRA is asking firms for “all retail communications that were distributed or made available by the firm or its affiliates on its behalf that refer or relate to cryptoassets or a service involving crypto transactions or the holding of a cryptoasset” during the period 1 July 2022, to 30 September 2022.

Firms must:

• Provide a list identifying each communication that:
  • includes the date the communication was first made available to the public;
  • identifies whether the communication was filed with FINRA’s Advertising Regulation Department. If the communication was filed, include the FINRA Advertising Regulation reference number for the Communication;
  • indicates whether each communication provided was approved by a registered principal of the firm. If so, provide the date of approval in the tabular list and provide separately records that reflect such approvals; and
  • identifies each cryptoasset and/or service involving the transaction or holding of a cryptoasset that the communication refers to, relates to, or concerns.
• Provide the firm’s written supervisory procedures concerning the communications.
• Provide any compliance policies, manuals, training materials, compliance bulletins, and any other written guidance in effect for any portion of the relevant period concerning communications.
• Provide any contracts or other written agreements in place between the firm and any affiliate concerning:
  • The firm’s creation or dissemination of communications on behalf of the affiliate or concerning services offered by the affiliate; and
  • The affiliate’s use of information concerning the firm’s customers to determine who will receive communications.

He said: "Given the complexity of issues, and recognising that some digital assets are securities, others may be commodities, and others may subject to a completely different regulatory regime, a formal regulatory process is needed now." 

The Senator said the SEC needs to take the following action:

• clarify what types of digital assets are securities;

• address how to issue and list digital securities;

• determine what disclosures are necessary for investors to be properly informed;

• establish a registration regime for digital asset security trading platforms; and,

• establish rules on how trading and custody of digital assets should be carried out.

Hickenlooper said that whatever the risks and benefits of new assets might be, "existing laws and regulations were not designed to deal with how digital assets are being used in the market. Currently, digital asset markets do not have a coordinated regulatory framework. This creates uneven enforcement, and deprives investors of a clear understanding of how they are protected from fraud, manipulation, and abuse." 

The nine reports together "articulate a clear framework for responsible digital asset development and pave the way for further action at home and abroad". They call on agencies to promote "innovation by kickstarting private-sector research and development and helping cutting-edge U.S. firms find footholds in global markets".

But the reports also call for measures to mitigate the downside risks, such as increased enforcement of existing laws and the creation of "common-sense efficiency standards for cryptocurrency mining". 

Recognising the potential benefits and risks of a U.S. Central Bank Digital Currency (CBDC), the reports encourage the Federal Reserve to "continue its ongoing CBDC research, experimentation, and evaluation and call for the creation of a Treasury-led interagency working group to support the Federal Reserve’s efforts".

Director Grewal said the SEC Division of Enforcement is taking proactive steps to police areas such as cryptoassets and cybersecurity and brought a number of first-of-their-kind enforcement actions over the past calendar year.

He said since its creation in 2017, the unit has brought more than 80 enforcement actions related to fraudulent and unregistered cryptoasset offerings and platforms, resulting in monetary relief totaling more than $2 billion, as well as numerous actions against SEC registrants and public companies for failing to maintain adequate cybersecurity controls and appropriately disclose cyber-related risks and incidents. 

He added that the Crypto Assets and Cyber Unit added 20 addtional roles and that the expanded unit will leverage the agency’s expertise to ensure investors are protected in the crypto markets and from cyber-related threats, with a focus on investigating securities law violations related to cryptoasset offerings, exchanges, broker-dealers, and lending and staking products; decentralized finance (DeFi) platforms; non-fungible tokens (NFTs); and stablecoins.