Harbor Square Investments, the subsidiary of tokenized securities platform Harbor, has received a broker-dealer license from the Financial Industry Regulatory Authority (FINRA), according to a report from CoinDesk.
Crypto Broker Dealer License Issued
Receiving a broker-dealer license as a cryptocurrency-centered company is not easy. U.S. regulators have worked with cryptocurrency companies with a lot of reservations. For over a year, the SEC and FINRA have delayed making a decision upon approving licenses for some 40 cryptocurrency companies.
The main concern of the regulators is the risk cryptoassets present for investors. As a broker-dealer, a company can buy and sell securities on their own and in the name of their clients. In the digital asset space, a broker-dealer who provides digital assets as securities can potentially market them to institutional investors.
Considering the technically complex and relatively new way of dealing with digital assets, these companies face strict requirements from the SEC and FINRA. According to Harbor CEO, Josh Stein, the novelty of the cryptocurrency technology has been challenging for the regulators to process their application.
Whenever broker-dealers deal in the name of their clients, questions around custody, safekeeping and private key access arise. Regulators had to understand the new paradigm before approving any licenses.
“It took the regulators a long time to get a handle on the space and understand it and its implications,” Harbor CEO Josh Stein. “This was very new for the SEC and FINRA, and they wanted to do it right.”
All-Round Services for Digital Issuance
With a broker-dealer license, Harbor plans to provide a comprehensive A-Z solution for digital asset issuers.
“We’re going to provide the technology platform to manage the fundraising, the technology to manage investors, the technology to tokenize and enable liquidity,” Stein said.
Up until Harbor’s license approval, the firm could only make introductions to partner broker-dealers. The firm had no possibility to handle key processes, such as performing due diligence, which now changes with the broker-dealer status.
Harbor’s licensing marks an important step in the regulatory landscape, as other broker-dealers for digital assets may appear on U.S. soil. Stein suggested that it’s a positive sign for the industry – and said more crypto broker-dealers may break through as the SEC and FINRA gains exposure to digital assets.
“The regulators are saying: ‘Hey, this is a regulated activity that a broker-dealer should go do. They should go sell these digital securities, because that’s perfectly legitimate, appropriate and within the regulations.’That’s a big deal for the whole industry.”