Some Congressional Blockchain Caucus members want more clarity on broker-dealer rules from the US securities regulator. In the letter to SEC Chairman Jay Clayton on Dec 9th, a number of the Congressional Blockchain Caucus members led by Tom Emmer (R-MN) sought the commission to verify which broker-dealers’ rules can take custody of digital securities. Broker-dealer licensing is required to sell securities in the US. The ecosystem for security tokens in the US is stalling. Unlike decentralized cryptos, security tokens register as securities but can trade in a better-decentralized manner because of efficient blockchain technology.
The nine congressional signatories include Tom Emmer (R-MN-6), Bill Foster (D-IL-11), David Schweikert (R-AZ-6), and Darren Soto (D-FL-9), who co-chair the Congressional Blockchain Caucus, as well as Warren Davidson (R-OH-8), Ted Budd (R-NC-13), Ralph Norman (R-SC-5), and Ro Khanna (D-CA-17), who are members. Dan Crenshaw (R-TX-2) was the only non-member signatory.
The letter also addresses the Financial Industry Regulatory Authority (FINRA), a non-governmental company that writes down and implements the rules governing registered brokers and broker-dealer industries. Its mission is to safeguard the people investing against fraud and malpractice. Currently, the directions are unclear, which has resulted in a colossal hold-up in registration.
The Contents of the Letter
The congressmen are requesting clarification that banks may act as good control locations for digital securities custody. FINRA should also be advised on the basic standards that should be met for broker-dealers to custody digital securities for their customers and their account. FINRA should also be guided on approving broker-dealer applications that meet those qualifications.
For any company to issue securities aimed at US investors, either conventional or digital, it has to register with the FINRA, a self-regulatory firm authorized by the government to grant official broker-dealer status. When a company becomes a broker-dealer, it can begin trading securities and hold digital securities, according to FINRA. However, FINRA could be uncertain about handling cryptocurrency firms.
Need for Direction
The letter to the Sec Chairman states FINRA has not fully denied any broker-dealer application that entails the custody of digital securities, which would render the applications eligible for appeal. It is because FINRA has not been guided by the SEC. Instead, the representatives claim, those applications have been confined.
Proof indicates that SEC and FINRA issued a joint statement in July 2019, acknowledging that many companies were looking to hold digital securities; however, neither organization provided distinct directions.