This year, cryptocurrency brokers and financial advisors who provide or provide advice on cryptocurrencies will fall under the jurisdiction of the United States Securities and Exchange Commission (SEC).

In a statement released on Feb. 7, the Securities and Exchange Commission (SEC) Examination Division outlined its priorities for the year 2023. The statement suggested that brokers and advisors who deal in cryptocurrency should exercise greater caution when offering, sell, or provide recommendations on digital assets.

SEC-registered brokers and advisers were said to be closely monitored to see whether or not they followed their “respective standards of care” while offering financial advice, making recommendations or referring clients to other professionals.

The Securities and Exchange Commission will also investigate whether these organizations “routinely” assess and update their processes to ensure they adhere to “compliance, transparency and risk management policies.”

This announcement was very similar to the priorities published by the SEC in 2022; However, it appears that this year the regulator is placing more emphasis on brokers’ standards of care and practices rather than its consideration of the unique risks posed by “emerging financial technologies,” which was highlighted in 2022.

The latest statement was issued after a report indicated that the SEC has been examining registered investment advisers who may be handing over custody of digital assets to their clients without the necessary credentials. The article was published nearly two weeks after the most recent statement.

According to a Reuters report, the investigation being conducted by the SEC has apparently been ongoing for several months, but has risen to the top of the priority list after the failure of cryptocurrency exchange FTX.

The Investment Advisers Act of 1940 stipulates that for investment advisory firms to be eligible to provide custodial services to clients, the firms must also comply with the custodial precautions outlined in that law.