Regulatory Policy for Institutional Lending Against Digital Assets

Introduction

This regulatory policy outlines the compliance framework for JTSA Global LLC, a global family office engaged exclusively in institutional lending against digital assets to companies, with no lending to retail clients or individuals. The policy addresses regulations from the Financial Crimes Enforcement Network (FinCEN), Financial Industry Regulatory Authority (FINRA), Swiss Financial Market Supervisory Authority (FINMA), UK Financial Conduct Authority (FCA), U.S. Securities and Exchange Commission (SEC), and France’s TRACFIN (Traitement du Renseignement et Action contre les Circuits Financiers Clandestins). For each regulator, we itemize applicable regulations and demonstrate that, as long as lending is restricted to institutional clients (companies), no specific licensing, permission, or special registration is required, subject to certain conditions.

This policy ensures compliance with anti-money laundering (AML), counter-terrorist financing (CFT), and securities regulations while supporting JTSA Global LLC’s economic activities. It is effective as of April 16, 2025, and should be reviewed annually or upon significant regulatory changes. Legal counsel in each jurisdiction must validate this policy to confirm compliance.

Scope

  • Activity: Institutional lending against digital assets (e.g., loans collateralized by cryptocurrencies, tokens, or other digital assets).
  • Clients: Exclusively companies (e.g., corporations, partnerships, or other legal entities), with no retail or individual lending.
  • Jurisdictions: Global operations, with specific focus on U.S. (FinCEN, FINRA, SEC), Switzerland (FINMA), UK (FCA), and France (TRACFIN).
  • Exclusions: No money transmission, securities brokerage, exchange operations, or retail-facing services.

Regulatory Framework by Authority

  1. Financial Crimes Enforcement Network (FinCEN) – United States

Overview: FinCEN, under the U.S. Department of the Treasury, administers the Bank Secrecy Act (BSA) and enforces AML/CFT regulations for financial institutions. FinCEN regulates entities involved in money transmission, including certain digital asset activities.

Applicable Regulations:

  • Bank Secrecy Act (BSA): Requires financial institutions to implement AML programs, file Suspicious Activity Reports (SARs), and maintain records for transactions involving digital assets (e.g., convertible virtual currencies, CVC).
  • Money Transmitter Definition: A money transmitter under 31 CFR § 1010.100(ff) includes entities engaged in the transfer of funds or providing money transmission services. Institutional lending against digital assets does not typically involve money transmission unless the lender facilitates fund transfers on behalf of clients.
  • 2020 Proposed Rule on CVC/LTDA: FinCEN proposed reporting requirements for transactions involving CVC or legal tender digital assets (LTDA) between hosted and unhosted wallets, but these apply to banks and money services businesses (MSBs), not lenders.

Licensing Exemption for Institutional Lending:

  • Institutional lending against digital assets, where JTSA Global LLC provides loans collateralized by digital assets to companies without facilitating fund transfers, does not meet the definition of a “money transmitter” or MSB under FinCEN’s regulations.
  • As long as JTSA Global LLC is not acting as an exchanger of digital assets or transmitting funds on behalf of clients, it is not required to register as an MSB with FinCEN.
  • Conditions:
    • Implement a risk-based AML/CFT program to monitor transactions, even if not registered as an MSB, to mitigate risks associated with digital assets (e.g., SAR filing for suspicious transactions ≥ $5,000).
    • Ensure lending activities do not involve retail clients, as FinCEN’s oversight intensifies for consumer-facing activities.
    • Verify client identities and conduct due diligence to comply with general BSA requirements, even absent MSB registration.

Conclusion: No specific FinCEN licensing, permission, or registration is required for institutional lending to companies, provided JTSA Global LLC does not engage in money transmission or retail services.

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  1. Financial Industry Regulatory Authority (FINRA) – United States

Overview: FINRA is a self-regulatory organization overseeing U.S. broker-dealers and securities activities. It enforces rules related to AML, suitability, and investor protection for digital assets classified as securities.

Applicable Regulations:

  • FINRA Rule 3310 (AML Compliance Program): Requires member firms to develop AML programs to detect and report suspicious transactions under the BSA. This applies to broker-dealers dealing in digital assets that are securities.
  • Regulatory Notice 20-23: Encourages firms to notify FINRA of digital asset activities, including non-securities, but this is not a mandatory registration requirement.
  • FINRA Rule 2111 (Suitability): Requires broker-dealers to ensure recommendations are suitable for institutional clients, with exemptions for sophisticated investors affirming independent judgment.

Licensing Exemption for Institutional Lending:

  • FINRA’s jurisdiction applies to broker-dealers engaged in securities transactions or investment activities. Institutional lending against digital assets, where JTSA Global LLC is not acting as a broker-dealer (e.g., not effecting securities transactions or recommending securities), falls outside FINRA’s registration requirements.
  • If digital assets used as collateral are not securities (e.g., Bitcoin, Ethereum, unless tokenized securities), FINRA rules do not apply to the lending activity.
  • Conditions:
    • Confirm that digital assets used as collateral are not securities under federal securities laws (e.g., via Howey Test analysis). If securities are involved, ensure lending does not constitute broker-dealer activity (e.g., no trading or matchmaking).
    • Maintain an AML program to monitor transactions, as FINRA emphasizes AML compliance for digital asset activities, even for non-members, to align with BSA.
    • Avoid retail communications or offerings that could trigger FINRA’s public communication rules (e.g., Rule 2210).

Conclusion: No FINRA licensing, permission, or registration is required for institutional lending to companies, provided JTSA Global LLC is not a broker-dealer and digital assets are not securities.

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  1. Swiss Financial Market Supervisory Authority (FINMA) – Switzerland

Overview: FINMA regulates financial institutions in Switzerland, including banks, securities dealers, and fintech firms, under the Financial Market Supervision Act (FINMASA) and Anti-Money Laundering Act (AMLA). FINMA oversees digital asset activities under its blockchain and DLT guidelines.

Applicable Regulations:

  • Banking Act (BA): Lending activities may require a banking license if the institution accepts public deposits or refinances loans through public funds. Institutional lending without public deposits typically does not trigger this requirement.
  • Anti-Money Laundering Act (AMLA): Requires financial intermediaries to register with a self-regulatory organization (SRO) or FINMA if engaged in activities like money transmission or asset management. Lending against digital assets may not constitute financial intermediation unless combined with other regulated activities.
  • FINMA ICO Guidelines (2018): Clarify when digital assets are securities (e.g., asset tokens) or payment tokens. Lending against non-security tokens (e.g., utility or payment tokens) is less likely to require licensing.

Licensing Exemption for Institutional Lending:

  • Institutional lending to companies, where digital assets serve as collateral and no public deposits are accepted, does not require a banking license under the BA, as JTSA Global LLC is not acting as a deposit-taking institution.
  • Lending activities are not considered financial intermediation under AMLA unless they involve money transmission, currency exchange, or asset management. Thus, no SRO or FINMA registration is required for pure lending to companies.
  • Conditions:
    • Ensure digital assets used as collateral are not securities (e.g., asset tokens), as dealing in securities may require a securities dealer license.
    • Implement AML/CFT measures, including client due diligence and transaction monitoring, to comply with AMLA, even absent formal registration.
    • Restrict lending to institutional clients to avoid consumer protection regulations that apply to retail activities.
    • Obtain a no-action letter or FINMA confirmation if lending involves novel digital asset structures to clarify regulatory status.

Conclusion: No FINMA licensing, permission, or registration is required for institutional lending to companies, provided no public deposits are accepted and digital assets are not securities.

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  1. Financial Conduct Authority (FCA) – United Kingdom

Overview: The FCA regulates UK financial services, including digital asset activities, under the Financial Services and Markets Act 2000 (FSMA) and AML/CTF regulations. It oversees cryptoasset businesses under the Money Laundering Regulations (MLRs).

Applicable Regulations:

  • Money Laundering Regulations (MLRs) 2017: Require cryptoasset exchange providers and custodian wallet providers to register with the FCA for AML/CTF compliance. Lending against digital assets is not explicitly covered unless it involves exchange or custody services.
  • FSMA Regulated Activities: Activities like arranging deals in investments or managing investments may require FCA authorization if digital assets are “specified investments” (e.g., security tokens).
  • FCA Cryptoasset Guidance (PS19/22): Clarifies that utility and exchange tokens are not regulated, but security tokens are. Lending against non-security tokens is less likely to require authorization.

Licensing Exemption for Institutional Lending:

  • Institutional lending against digital assets, where JTSA Global LLC provides loans to companies without offering exchange or custody services, does not fall under the MLRs’ definition of a cryptoasset business requiring FCA registration.
  • If digital assets used as collateral are not security tokens, the lending activity is not a regulated activity under FSMA (e.g., not arranging deals in investments or lending money as a regulated investment).
  • Conditions:
    • Confirm digital assets are utility or exchange tokens, not security tokens, to avoid FSMA authorization.
    • Implement AML/CTF measures, including KYC and transaction monitoring, to comply with general UK AML laws, even if not FCAregistered.
    • Avoid retail marketing or services, as FCA consumer protection rules are stringent for retail cryptoasset activities.
    • Seek FCA confirmation or legal advice for complex digital asset structures to ensure they are not regulated investments.

Conclusion: No FCA licensing, permission, or registration is required for institutional lending to companies, provided digital assets are not security tokens and no exchange or custody services are offered.

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  1. Securities and Exchange Commission (SEC) – United States

Overview: The SEC regulates securities markets and participants, including digital assets that meet the definition of a security under federal securities laws (e.g., Howey Test). It oversees broker-dealers, investment advisers, and securities offerings.

Applicable Regulations:

  • Securities Act of 1933 and Securities Exchange Act of 1934: Require registration for securities offerings and broker-dealers. Digital assets that are investment contracts (e.g., tokenized securities) are subject to SEC oversight.
  • Investment Advisers Act of 1940: Applies to entities managing client assets or providing investment advice. Lending against digital assets is not typically investment advice.
  • SEC Digital Asset Framework (2019): Clarifies when digital assets are securities. Non-security digital assets (e.g., Bitcoin) are outside SEC jurisdiction.

Licensing Exemption for Institutional Lending:

  • Institutional lending against digital assets, where JTSA Global LLC is not offering, trading, or advising on securities, does not require SEC registration as a brokerdealer or investment adviser.
  • If digital assets used as collateral are not securities (e.g., utility tokens, cryptocurrencies like Bitcoin), the lending activity is not subject to SEC securities regulations.
  • Conditions:
    • Conduct a legal analysis (e.g., Howey Test) to ensure digital assets are not securities. If securities are involved, lending must not involve offering or trading activities.
    • Implement AML/CFT measures, as SEC-regulated entities (e.g., brokerdealers) are subject to BSA requirements, and non-regulated entities should align with best practices.
    • Avoid retail offerings or communications that could trigger SEC’s public offering rules (e.g., Regulation D exemptions apply only to accredited investors).

Conclusion: No SEC licensing, permission, or registration is required for institutional lending to companies, provided digital assets are not securities and no broker-dealer or advisory activities are conducted.

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  1. TRACFIN – France

Overview: TRACFIN, under the French Ministry of Economy and Finance, is France’s financial intelligence unit responsible for combating money laundering, terrorist financing, and financial fraud. It oversees AML/CFT compliance for financial institutions and certain non-financial entities, including those dealing with digital assets, under the French Monetary and Financial Code.

Applicable Regulations:

  • Monetary and Financial Code (CMF): Articles L561-2 and L561-10 require financial institutions and designated non-financial businesses (e.g., cryptoasset service providers) to implement AML/CFT measures, including reporting suspicious transactions to TRACFIN.
  • AMF Digital Asset Regulations: The Autorité des Marchés Financiers (AMF) regulates digital asset service providers (DASPs) under the PACTE Law (2019). Activities like crypto-to-crypto exchange, custody, or trading require AMF registration, but lending is not explicitly listed.
  • EU 5th AML Directive (AMLD5): Implemented in France, requires cryptoasset businesses (e.g., exchanges, wallet providers) to register with the AMF for AML/CFT oversight. Lending against digital assets is not covered unless it involves custody or exchange services.

Licensing Exemption for Institutional Lending:

  • Institutional lending against digital assets, where JTSA Global LLC provides loans to companies without offering custody, exchange, or trading services, does not fall under the DASP activities requiring AMF registration under the PACTE Law.
  • TRACFIN’s oversight focuses on AML/CFT compliance, not licensing for lending activities. As long as JTSA Global LLC is not engaged in regulated DASP activities (e.g., custody, exchange), no specific TRACFIN or AMF registration is required.
  • Conditions:
    • Implement robust AML/CFT measures, including KYC, client due diligence, and suspicious transaction reporting to TRACFIN (e.g., for transactions indicating potential money laundering or terrorist financing).
    • Ensure digital assets used as collateral are not financial instruments under French law (e.g., security tokens), as dealing in such assets may require AMF authorization.
    • Restrict lending to institutional clients to avoid French consumer protection laws applicable to retail activities.
    • Consult with the AMF or TRACFIN for complex digital asset structures to confirm they are not regulated activities under the CMF.

Conclusion: No specific TRACFIN or AMF licensing, permission, or registration is required for institutional lending to companies, provided JTSA Global LLC does not engage in custody, exchange, or trading services and complies with AML/CFT obligations.

General Compliance Requirements

While no specific licensing is required for institutional lending against digital assets to companies, JTSA Global LLC must adhere to the following best practices to ensure compliance:

  • AML/CFT Programs: Implement risk-based AML/CFT programs across all jurisdictions, including KYC, transaction monitoring, and suspicious transaction reporting (e.g., SARs for FinCEN, TRACFIN reports).
  • Digital Asset Classification: Conduct legal analysis to confirm digital assets used as collateral are not securities or financial instruments (e.g., Howey Test for SEC, FINMA ICO Guidelines, FCA PS19/22, AMF PACTE Law).
  • Client Due Diligence: Verify that clients are companies, not individuals, and maintain records to demonstrate institutional focus.
  • Jurisdictional Monitoring: Regularly review regulatory updates from FinCEN, FINRA, FINMA, FCA, SEC, and TRACFIN, as digital asset regulations evolve rapidly.
  • Legal Confirmation: Obtain no-action letters, regulatory confirmations, or legal opinions in each jurisdiction to validate exemptions from licensing.

Implementation and Review

  • Responsible Party: The Chief Compliance Officer shall oversee policy implementation, including AML/CFT programs and regulatory monitoring.
  • Training: Staff involved in lending operations shall receive annual training on AML/CFT and digital asset regulations.
  • Review Cycle: This policy shall be reviewed annually or upon significant regulatory changes, with updates approved by the Board of Directors.
  • Legal Review: Engage legal counsel in the U.S., Switzerland, UK, France, and other relevant jurisdictions to validate exemptions and ensure ongoing compliance.

Conclusion

This regulatory policy confirms that JTSA Global LLC’s institutional lending against digital assets to companies does not require specific licensing, permission, or registration from FinCEN, FINRA, FINMA, FCA, SEC, or TRACFIN, provided the family office adheres to the conditions outlined above. By maintaining robust AML/CFT measures, verifying digital asset classifications, and restricting activities to institutional clients, JTSA Global LLC ensures compliance with global regulatory frameworks while supporting its economic objectives.