2022 will tell us whether existing regulators can produce a new regulatory stew to address the unique dimensions of digital assets — or whether an entirely new oversight mechanism is required. However, whether a firm is a multinational financial institution with firm plans to launch a cryptocurrency security offering or a smaller advisory firm that views crypto as key to their growth strategy of reaching retail investors — a few proactive principles should be considered now:

1. Now is the time to ramp compliance staff.
As illustrated by Binance, Robinhood, and others — more firms have recognized the importance of native compliance speakers.

2. Compliance infrastructure must be agile and responsive.
Cryptocurrency regulatory ambiguity is not sustainable. Stakes are too high, and the SEC (independent of their future role) have stated clearly that they see a widening gap between technology and regulation, and they will act to modernize outdated rules. Hardcoded policies and oversight procedures will have marginal value if they are not able to easily respond to inevitable changes in the regulatory landscape.

3. Don’t forget where the action is.
Cryptocurrency security markets are being driven by a younger class of investors, with a different way of communicating and interacting with investment influencers. Marketing and selling efforts for cryptocurrency investments will happen on platforms that are familiar and comfortable for this class of investors. Compliance controls need to work as well on TikTok, Instagram, and Reddit as they do over email and phone calls. In 2022 and beyond, information risk will live everywhere.

4. Know your recordkeeping and supervisory essentials.
Regardless of the outcome in determining who has the overriding regulatory responsibility, the fundamental rules governing cryptocurrency securities are likely to be subject to the same (or very similar) recordkeeping, storage, and supervisory obligations as every other investment category. This should encourage established firms to modify existing control technologies to ensure they can address the volatility and unique communications activity associated with crypto. New market entrants must prioritize investments in compliance infrastructure to manage the ongoing watchful eye of regulators.

5. Watch this space.
As we have seen in recent stories about the SEC and FINRA addressing digital communications, it is highly unlikely that explicit regulatory guidance will keep pace with technology innovation. Waiting for regulatory clarity to determine policies and govern information pertaining to securities is futile. There will be no answer found in a Google search. Engage with your peers, industry associations, and share best practices on forums such as those run by Smarsh.

Cryptocurrencies and digital assets are transforming financial services, and additional regulation will inevitably follow. Traditional firms and high-growth FinTech entrants can both experience positive business outcomes by investing now in expertise, policies, training, and automated compliance controls to stay prepared for the regulatory uncertainty ahead in 2022.