Cryptocurrency was created to be larger than one government. The concept of the currency extends borders and was designed to address issues such as inflation that are often found in traditional currencies such as the dollar. In addition, cryptocurrency was designed with various protections in place to make it more difficult to manipulate or hack.

For new and curious investors, the concept of cryptocurrency and regulation might seem abstract. Cryptocurrency regulations and rules are still being formed because of the relative youth of cryptocurrency. The U.S. Securities and Exchange Commission (SEC), as well as the Financial Industry Regulatory Authority (FINRA), have been grappling with how to oversee certain aspects of virtual currency. Cryptocurrency to some degree is already facing regulation under both the SEC and FINRA with potential for more regulation down the line. 

What is the SEC?

The Securities and Exchange Commission typically works to safeguard investors and the market. Its goal is to create a greater sense of market transparency by enforcing security laws and penalizing dishonest behavior in the market and financial sector. Cryptocurrencies are currently not fully registered with the SEC. However, pioneers of digital securities such as INX have quickly adopted regulations.

What is FINRA?

FINRA works to protect investors by promoting clarity in terms of brokers and investment firms. Although not a government entity, FINRA holds a notable amount of power in having members remain true to defined rules. FINRA oversees the licensing of financial professionals such as stockbrokers that potentially sell cryptocurrency to the public. FINRA can be considered as indirectly overseeing cryptocurrency because it oversees brokers and investment firms.

What is Cryptocurrency?

Cryptocurrency is a digital currency that is relatively new in terms of public comprehension and government regulation. Each unit of cryptocurrency is commonly called a coin or token.

The currency works in tandem with a technology called blockchain to function. Blockchain holds a record of transactions that occur on the cryptocurrency and is designed to withstand tampering because of complex checking methods.

A hacker, for example, would struggle to corrupt cryptocurrency in a way that a forger of traditional currency would not. A hacker attempting to steal or corrupt cryptocurrency would find it difficult to complete a theft because of the currency’s inherent design. Cryptocurrencies prove difficult to hack because they receive a constantly updated version of the blockchain that functions similarly to a massive receipt. Unlike traditional currency, the system has a way to check itself against theft thanks to a largely decentralized system. 

SEC and FINRA Involvement in Cryptocurrency

The SEC and FINRA are interested in regulating cryptocurrency and claim that such action can help boost investor confidence in the currency. In addition, the SEC and FINRA claim that regulation would require cryptocurrencies to make trades public so that the groups could better monitor them. Regulation with the SEC and FINRA would also help prevent illegal activity paid or funded with cryptocurrency. Regulation could offer the added benefit of investor protection seeing as there would be rules and regulations in place to help safeguard the typical investor. As the vast complexities of the digital currency market are often decentralized, the SEC and FINRA are still in the process of developing a more designated path.

INX is the first SEC-regulated digital security on the blockchain that is registered for the general public. Currently, only a select few cryptocurrencies and platforms such as INX have aligned with the SEC and FINRA. It is a cryptocurrency platform that is fully regulated and offers its own token.

Digital currency pioneers such as INX have already entered into regulation to offer additional benefits such as safeguards for investors. Cryptocurrency is still relatively new, but when properly managed it has the potential to provide previously unknown freedom as a currency that extends beyond borders. 

Compare Cryptocurrency Platforms

Benzinga offers helpful insight and information about cryptocurrency platforms and blockchain securities. However, it is important to research and consult with a financial advisor before investing in cryptocurrency. Cryptocurrency has a volatile nature and like most investments, offers no guarantee that you will retain your initial investment. Before investing, consider your level of risk tolerance.

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