Narrator: Tanya, a tax manager, has a dependent son that wants to
purchase cryptocurrency. He is very excited about a particular
cryptocurrency and wants to make the purchase right away. Tanya
knows that there are independence rules related to cryptocurrencies
and is unsure how to proceed. She weighs her options. She can tell
her son that he can’t make the purchase until she has a chance to confirm
whether it is permissible, or she can let him go ahead and buy it, just
this once. In the interest of avoiding an independence violation, she
decides to reach out to Risk Management - Independence for assistance
in determining whether the cryptocurrency purchase is permissible.
Let’s listen to the conversation.
Tanya: My son would like to purchase a cryptocurrency. I know there are
independence rules on cryptocurrencies, but I’m not sure where to start.
Independence: It’s good that you called. First off, there are several
cryptocurrencies and digital assets that have already been identified as
“safe” for independence purposes. The list can be found on the KPMG
Independence Safe List on the Independence portal - Bitcoin, Litecoin,
Ethereum and Verge are some examples. You can purchase these digital
assets on the Safe List through a digital wallet custodian, like Coinbase,
and they don’t need to be reported in your KICS account.
Tanya: That’s good to know, but he’s interested in a different one.
Independence: Got it. If it’s not one of the cryptocurrencies included
in the Safe List, then you would need to check the restriction status of the
cryptocurrency or digital asset in KICS before he makes the purchase.
Your dependent son would not be permitted to purchase any cryptocurrency
or other digital asset that is restricted. Any permitted cryptocurrency or
digital asset that you hold - other than those on the KPMG Independence
Safe List - will now need to be reported in your KICS account.
Tanya: So I would need to check KICS before he purchases the
cryptocurrency, just like I would before making an investment?
Independence: That’s right. Before purchasing a cryptocurrency
or other digital asset, you should always check KICS to determine its
restriction status. There’s a large number of cryptocurrencies listed in
KICS, and as long as it’s not a restricted option, you can purchase it.
Tanya: Ok, but what if I can’t find the cryptocurrency in KICS?
Does that mean it’s not restricted?
Independence: No, that just means additional research is needed. If you can’t
find it in KICS, reach out to Risk Management - Independence via the
Independence Inquiry Submission Form found on the Independence portal,
so that we may research and confirm the restriction status. And make
sure your son holds off on making the purchase until you receive
a response and have conclusive evidence that it’s not restricted – otherwise,
you may end up with an independence violation if it turns out to be restricted.
Tanya: Okay, I think I’ve got it. Is there anything else I should be thinking about?
Independence: Well, yes. You’ll need to consider where your son
is planning to hold the cryptocurrency. Using a digital wallet custodian or
exchange could impact your independence, since the balances may be
subject to the independence rules that apply to brokerage account balances.
If the custodian or exchange is an SEC restricted entity and you are
a Covered Person, you can’t hold accounts with that entity if the digital
asset custodian or exchange doesn’t provide insurance coverage under SIPC.
Tanya: Ok, it sounds like we have a lot of options. I’ll be sure to do
my research before we make any purchases and will monitor Risk
Management – Independence communications for
updates on this evolving topic.
Narrator: The conversation with Risk Management - Independence
helped Tanya recognize and evaluate the independence considerations
before allowing her son to make the purchase. They informed her of the
steps and research that must be undertaken before purchasing
cryptocurrency or other digital assets. By discussing the matter with
Risk Management -Independence first, Tanya acted in an ethical manner
and was able to decide on the best course of action to avoid an
independence violation.