Chief of SEC, FinCEN and CFTC issue warning for digital asset operators

The heads of top US financial regulators issued a joint statement warning digital asset business operators to abide by the banking laws of the United States. The statement was signed by the leaders of the U.S. Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and the U.S. Securities and Exchange Commission (SEC).

The statement warned businesses dealing with digital assets to comply with the Bank Secrecy Act (BSA) which includes regulatory guidelines for anti-money laundering(AML) and countering financing of terrorism (CFT). Under the US regualations, any asset that qualifies as securities, commodities, and security-or commodity-based derivative products are considered as Digital assets.

The joint statement also noted that the nature of the digital assets would determine which regulators the businesses need to register with and cited an example as well,

“For example, the AML/CFT activities of a futures commission merchant will be overseen by the CFTC, FinCEN, and the National Futures Association (NFA); those of an Money Service Business will be overseen by FinCEN; and those of a broker-dealer in securities will be overseen by the SEC, FinCEN and a self-regulatory organization, primarily the Financial Industry Regulatory Authority (FINRA).”

Chief of financial regulatory bodies issue additional statements over their jurisdictions

Apart from the joint statement signed by the heads of three regulatory bodies, each one of them also released additional comments to clarify which types of businesses fall under their respective jurisdictions.  CFTC chairman Heath Tarbert noted that they are responsible for “integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.”

FinCEN director Kenneth Blanco stated that their department is responsible for enforcing BSA and keep a check on the effectiveness of the AML/CFT for the financial service providers. He said that their mission is to protect the “financial system from illicit use, ensure our national security, and protect our people from harm.”

SEC chairman Jay Clayton said that their role is to ensure investor protection, to maintain fair, orderly and efficient markets. The SEC has jurisdictions over “securities and securities-related conduct.” The SEC chairman explained,

“The SEC oversees the key participants in the securities markets, some of which may engage in digital asset activities. Key participants in the securities markets include but are not limited to national securities exchanges, securities brokers and dealers, investment advisers, and investment companies.  Market participants receiving payments or engaging in other transactions in digital assets should consider such transactions to present similar or additional risks, including AML/CFT risks, as are presented by transactions in cash and cash equivalents. “