FINRA found violations in 70% of retail crypto services advertising

The organization called for warnings to potential customers about the speculative nature of crypto assets and the lack of a clear regulatory framework

24.01.2024 - 08:25

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What’s new? The US Financial Industry Regulatory Authority (FINRA) has analyzed over 500 retail cryptocurrency service offerings from various firms. It found that 70% of them violated FINRA’s broker-dealer communications with the public, which mandate that potential customers be provided with honest and complete information about services. For example, FINRA Rule #2210 prohibits making false, exaggerated, unsubstantiated and misleading advertising statements.

Press release

What else is known? FINRA staff identified, among other things, making false statements or implying that cryptocurrencies function like cash or cash-equivalent instruments, as well as comparing cryptocurrencies to other assets (e.g., equity investments or cash) without providing a reliable basis for comparing the various characteristics and risks of those investments.

The service also found the firms’ failure to provide a reliable basis for valuing crypto assets due to a lack of clear explanations of how they are issued, held, transferred, or sold. Some service descriptions even falsely claimed that crypto assets were subject to protections under the federal securities laws or FINRA rules.

According to the organization, advertising content aimed at retail customers should include warnings about the risks associated with the speculative nature of crypto assets and the uncertainty of their regulation, which could result in the loss of all funds due to high volatility or fraud.

In June 2022, FINRA offered laid-off crypto companies’ professionals employment amid massive layoffs in the industry caused by the market downturn. The organization noted the need for employees with experience in the cryptocurrency industry.

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