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Congressmen Ask for Clarity on Crypto

Nine congressmen signed a letter to SEC Chairman Jay Clayton, asking for more clarity around the broker-dealer applications for companies in the crypto space.

The cosigners include Tom Emmer (R-MN-6), Bill Foster (D-IL-11), David Schweikert (R-AZ-6), and Darren Soto (D-FL-9), who supported the Congressional Blockchain Caucus, together with Warren Davidson (R-OH-8), Ted Budd (R-NC-13), Ralph Norman (R-SC-5), and Ro Khanna (D-CA-17), who are also members. Dan Crenshaw (R-TX-2) was the only non-member to sign the letter. A press release from Tom Emmer’s office says that the congressmen request three things:

“First, issue a formal clarification that banks may act as good control locations for the custody of digital securities.

Second, advise FINRA on the specific criteria that must be met for broker-dealers to custody digital securities for their customers and their accounts.

Third, instruct FINRA to approve broker-dealer applications that meet those requirements.”

For a company to issue securities aimed at US investors, it must be registered with the Financial Industry Regulatory Authority (FINRA). The government authorized this self-regulatory organization to grant official broker-dealer status.

When a company becomes a broker-dealer in the sight of FINRA, it can begin buying and selling securities for the clients or itself and hold the digital securities.

However, FINRA wasn’t sure what to do with the cryptocurrency firms.

The letter to Clayton proclaims, “in the absence of guidance from the SEC, FINRA has not outright denied any broker-dealer applications that involve the custody of digital securities, which would render the applications eligible for appeal.” In its place, the representatives claim that those applications have been in a state of limbo.

They point out that the SEC and FINRA issued a joint statement in July 2019 recognizing that more and more companies have been looking to hold digital securities, but that neither organization has done much about it in the way of offering assistance.

The congressmen are asking that the SEC support FINRA in qualifying companies toward becoming approved broker-dealers and that the SEC confirm that banks can hold digital securities, something the Office of the Comptroller of the Currency, an office of the US Treasury that’s currently being run by Brian Brooks, a former Coinbase executive, already suggested.

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