By Draftify Outsourcing Services – Legal Research & Compliance Team
The cryptocurrency sector operates at the intersection of securities and commodities law — with ongoing debate over which digital assets fall under the jurisdiction of the SEC versus the CFTC. For professionals or businesses engaged in crypto trading, advising, or managing assets, understanding and securing the proper licenses is critical to maintaining compliance and avoiding severe penalties.
Who Needs a License in Crypto?
If you or your team:
Buy or sell cryptocurrency on behalf of others,
Provide investment or trading advice, or
Manage client crypto assets,
… then one or more regulatory licenses may be required under U.S. federal law.
Regulatory oversight in this field comes from several agencies, primarily:
Securities and Exchange Commission (SEC)
Financial Industry Regulatory Authority (FINRA)
FINRA categorizes licensed individuals as registered representatives or associated persons. While enforcement against small or new crypto businesses is still limited, the risk of regulatory scrutiny continues to grow.
Penalties for Trading Cryptocurrency Without a License
Under the Investment Advisers Act of 1940 (15 U.S.C. § 77h-1), operating as an unlicensed securities professional can result in both civil and criminal penalties, including:
Penalty TypeDescriptionFine / TermCease and Desist OrderProhibition from future violations§77h-1(a)Asset SeizureRegulatory seizure of business assets§77h-1(c)ImprisonmentUp to 5 years in federal prisonCivil Penalties (Individuals)Tier 1: up to $10,000
Tier 2: up to $75,000
Tier 3: up to $150,000§77h-1(g)(2)Civil Penalties (Entities)Tier 1: up to $100,000
Tier 2: up to $375,000
Tier 3: up to $725,000§77h-1(g)(2)
These penalties apply per violation.
Tier 2 typically involves fraud, deceit, or reckless conduct. Tier 3 applies to cases involving significant investor losses or financial gain through misconduct.
Why Licensing Matters
1. Investor Confidence
Investors are more likely to trust and fund businesses that demonstrate regulatory compliance. Holding the appropriate licenses signals credibility and mitigates perceived risk.
2. Customer Protection
Licensed operators not only reduce their clients’ exposure to risk but also protect themselves in the event of disputes, market downturns, or customer complaints.
3. Reputation and Competitive Advantage
Unlicensed activity can harm your brand and provide competitors or disgruntled clients with legal leverage. Compliance protects your business and reputation alike.
4. Banking and Financial Access
Banks are particularly cautious with crypto-related businesses due to regulatory scrutiny. Being fully licensed helps maintain essential banking relationships and prevents sudden account closures.
Key Licensing and Certification Options
1. Securities Industry Essentials (SIE)
Often referred to as the “GED of finance,” the SIE is the foundational exam for financial professionals.
It covers:
Capital markets and economic structures
Investment products and risks
Trading practices and anti-fraud provisions
Regulatory obligations and ethics
Holding the SIE is highly recommended for professionals involved in any form of crypto investment advisory or brokerage.
2. Series 7 License – For Crypto Treated as Securities
The Series 7 license, officially the General Securities Representative Exam, permits trading and advising across most securities — including those classified as digital securities.
It is essential for:
Crypto assets deemed investment contracts (regulated by the SEC)
Individuals buying/selling crypto using client funds
Advisors providing crypto investment guidance
The exam duration is 4 hours, costs approximately $245, and follows the SIE as a prerequisite.
3. Series 3 License – For Crypto Treated as Commodities
The Series 3, or National Commodities Futures Exam, is required for those dealing in crypto considered commodities (typically regulated by the CFTC).
Duration: 2.5 hours
Cost: $130
This license is vital for professionals trading or advising on Bitcoin, Ethereum, or other digital assets likely to be classified as commodities.
4. Series 57 License – For Securities Traders
The Series 57 (Securities Trader Representative Exam) certifies traders dealing in securities, including tokenized assets traded on regulated exchanges.
However, obtaining sponsorship from a FINRA member firm is often challenging for crypto professionals, as few traditional firms are willing to assume regulatory exposure for digital assets.
5. Series 63 License – State-Level Requirement
The Series 63 (Uniform Securities State Law Exam), administered by NASAA, complements the Series 6/7 licenses and focuses on ethical and fiduciary obligations at the state level.
Some states (e.g., Florida, Colorado, Ohio) waive this requirement.
Cost: $147 | Passing Score: 72%
6. Series 65 License – For Crypto Investment Advisors
If your crypto business provides advisory services for a fee, the Series 65 (Uniform Investment Adviser Law Exam) is mandatory.
This license makes you a fiduciary, legally bound to act in your client’s best interest.
Exam: 130 questions | Duration: 3 hours | Cost: $187 | Passing Score: 72%
Final Takeaway
Licensing in the cryptocurrency industry is not merely a formality — it’s a safeguard. Whether your business is advising, trading, or developing crypto solutions, compliance ensures long-term stability, investor trust, and regulatory protection.
Draftify Outsourcing Services assists U.S. Clients with comprehensive legal research, documentation, and regulatory analysis for cryptocurrency and fintech businesses.
We help you stay compliant, reduce risk, and focus on growth.
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