A joint statement on the use of digital assets and specific laws operators must abide by, has been released. On Friday the 11th, three of the most binding regulatory authorities in the financial space, released the statement, stating specifics about the crypto sector and reminding all participants that certain already laid down laws regarding financial services in the U.S., must be strictly adhered to.
The regulatory bodies including the U.S. Commodity Futures Trading Commission (CFTC), Financial Crimes Enforcement Network (FinCEN), as well as the U.S. Securities and Exchange Commission (SEC), put out the joint statement to “remind persons engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT) duties. The “Agencies”, as they are jointly called, specify that these duties are contained within the Bank Secrecy Act (BSA) and are to be religiously followed.
The statement further explains that the AML/CFT duties apply to all entities that are officially regarded as financial institutions by the BSA. These institutions include “futures commission merchants and introducing brokers obligated to register with the CFTC, money services businesses (MSBs) as defined by FinCEN, and broker-dealers and mutual funds obligated to register with the SEC.”
There is also a mention of what exactly qualifies as “digital assets”. According to the statement, the Agencies realize that the general crypto market might use its own specific nomenclature to label or categorize some of these assets. However, the Agencies note that the names being used by market participants, might not fully describe the asset, or align with the definition or description of the asset, as set by the BSA, the SEC or the CFTC. The Agencies believe that what should be used as the delineating factor are the “facts and circumstances underlying an asset, activity or service, including its economic reality and use (whether intended or organically developed or repurposed)”.
Apart from the main statement in the publication, each of the heads of the three agencies made additional comments. For the S.E.C, Chairman Jay Clayton explains that the Commission’s primary mission is the protection of investors as well as the conduct of fair and properly regulated markets for authorized exchange and trading. Therefore, all entities in the business of digital assets that qualify as securities, fall within the SEC’s purview.
The CFTC Chairman, Heath Tarbert, commented that the Commission is tasked with the regulation of all participants who engage in derivative markets including futures commission merchants as well as brokers and swap dealers. These participants are also mandated to report any improper activity to the CFTC, as part of its regulations.
The FinCEN Director, Kenneth A. Blanco, points out that as far as the BSA is concerned and especially with AML and CFT, the FinCEN is the lead regulator. According to Blanco, FinCEN has full authority over financial institutions in the U.S to make sure they all adhere to strict AML/CFT requirements.