Most financial services firms preempting crypto regulations with employee policies

Most financial services firms preempting crypto regulations with employee policies
Almost half of firms say they already have a policy, and more intend to add one this year.
FEB 21, 2024

Regulators have been considering how and when to implement regulations to protect investors participating in the fast-growing cryptocurrency markets, but firms are ahead of the game.

A survey of financial services firms by employee compliance software provider StarCompliance shows that 43% of respondents already have an employee crypto-trading policy, while 23% intend to implement one this year.

A further cohort of firms say that crypto assets are already covered by existing conflict-of-interest policies for trading in traditional securities and digital assets.

For those with dedicated policies, the report shows that pre-clearance of trades to avoid conflicts of interest; prohibition of crypto mining and participation in initial coin offerings; and disclosure of crypto trading accounts and holdings for future regulations are the key elements.

"As the regulatory landscape for digital assets continues to evolve, companies need to be ready to comply with new or updated rules. This starts with a serious examination of their existing compliance software, processes, and teams," said Jennifer Sun, CEO at StarCompliance. "With the results of this survey, we are delivering new insights into the industry's preparedness for any upcoming crypto regulatory frameworks, and the steps firms can take to stay compliant and competitive."

The research, in collaboration with Aer Compliance, found that more than half of respondents do not what share of employee’s tradeable assets are invested in cryptos, and the percentage that can say it is less than 25% has fallen 12 points to 45%.

Asset managers made up 47% of respondents, with others including broker-dealers, private equity firms, and investment banks.

Although most poll participants do not know the age group of employees who are trading in cryptos the most, around one third indicated that millennials are dominant in this respect.

REGULATORY FRAMEWORK

Regulatory concerns about cryptocurrency assets are translating to a record number of enforcement actions by the SEC, according to a recent report.

The question of when regulators will introduce rules governing trading of crypto assets saw 41% responding that it would be within the next 18 months, although this is a 21-point drop from a year earlier, reflecting how regulation is lagging crypto-trading adoption.

While two-thirds of firms intend to use monitoring software to assess how employees are trading cryptos, 18% are waiting to see what regulators propose.

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