This is yet another example of the SEC bringing an enforcement action for violations related to "crypto asset securities" without actually specifying which tokens the company was handling that constitute "crypto asset securities." The industry has been looking for guidance on how to define these assets, but once again, are left with the vague notion that "just about everything" could be included.

The SEC's decision to charge the adviser, despite the firm having shut down operations over a year ago, raises questions about the timing and effectiveness of such enforcement actions. Critics argue this does little to protect current investors and, instead, highlights a reactive rather than proactive approach to regulation. Nonetheless, it serves as a stark reminder for investment advisers to ensure compliance with the Custody Rule and that crypto assets are not exempt from these…

Some in the industry attribute the decision to withdraw the application to heightened regulatory scrutiny and the SEC's reluctance to approve these new products. Others, however, remain optimistic and see this as continued momentum. They believe both the NYSE and Nasdaq (who also withdrew their application) will re-file updated applications in the next few days or weeks. In a similar move, CBOE withdrew its application but has now resubmitted a more detailed proposal.

FINRA recognizes that the crypto landscape is dynamic and multifaceted. Its Crypto Hub aims to take a risk-based approach, focusing on areas with the highest impact. This crypto asset questionnaire was intended to help FINRA understand how firms engage with crypto assets–whether through trading, custody or advisory services–and enable FINRA to tailor its guidance and examinations effectively. While some insights were relayed, they noted "there weren't any big surprises."