The inevitable regulatory response is not about whether cryptocurrency is exempted or carved out from existing regulatory mandates. It’s more likely to center on establishing consistent definitions of products and market participants, common frameworks for registration and operation, and specific areas of risk unique to cryptocurrencies that firms will need to monitor. In February 2021, the SEC released a risk alert focused on digital assets, highlighting specific areas of risk for investment advisors and broker-dealer firms.

Investment advisors should pay attention to recordkeeping practices, given that “digital asset trading platforms vary in reliability and consistency with regard to order execution, settlement methods, and post-trade recordation and notification.”

Broker-dealers should put focus on supervision for outside business activities (OBA) among other areas of risk following lessons from the recent controversy with Roaring Kitty and OBA. The SEC notes, “staff has observed instances of registered representatives of broker-dealers offering services related to digital assets apart from their employer.

"FINRA-member broker-dealers must evaluate the activities of their registered persons to determine whether such activity constitutes outside business activities or an outside securities activity and therefore should be subjected to the approval, supervision, and recordation of the broker-dealer. The staff will continue to review FINRA-member broker-dealer compliance processes in connection with the evaluation, approval, and monitoring of outside business activities.”