IOSCO, the global standard setter for securities markets, today issued for consultation detailed recommendations to jurisdictions across the globe as to how to regulate crypto-assets, arguing that it is the best placed organisation to oversee a global policy framework
In a major initiative designed to improve global standards of regulation of crypto-assets, the recommendations outline how clients should be protected and how crypto trading should meet the standards that apply in public markets.
“As the G7 Finance Ministers and Central Bank communiqué of 13 May has once again reminded us, the time has come to put an end to the regulatory uncertainty that characterises crypto activities,” said IOSCO chair Jean-Paul Servais.
“Today’s consultation paper received unanimous support from the IOSCO Board and is the outcome of an intense period of regulatory risk analysis, information sharing and capacity building. As such, it will mark a turning point in addressing the very clear and proximate risks to investor protection and market integrity risks.
Servais continued: “With 130 members around the world regulating more than 95% of the world’s securities markets, IOSCO is best positioned to deliver an effective and globally consistent set of policy recommendations. The strong support of the IOSCO Board will ensure the timely implementation of the recommendations by all IOSCO members to limit the risk of regulatory arbitrage. Strengthened cooperation between our members while supervising these markets through a global framework will contribute to protecting investors better and to a credible deterrence of non-compliant actors.”
Lim Tuang Lee, chair of the IOSCO Board-Level Fintech Task Force (set up to develop the policy recommendations), added: “The recommendations in IOSCO’s Consultation Report set expectations and guardrails to regulate and supervise crypto-asset markets, which are inherently cross-border in nature.
“Crypto-asset service providers need to address unacceptable conflicts of interest and take far more seriously the right of clients to have their monies and assets carefully minded and accounted for. It is time for regulators to work together across borders and various jurisdictions to ensure that investor protection and market integrity are upheld in crypto-asset markets.”
IOSCO has opened a public consultation on its recommendations which closes on 31 July 2023. A final set of standards are expected to be confirmed by the end of the year, after which jurisdictions will be expected to review their current regulatory frameworks to ensure that they comply with the standards and fix any gaps promptly.
The move has been welcomed by industry players as another step towards consistency and control.
“The recommendations published today by IOSCO are an important push for jurisdictions around the world to get on with regulating crypto assets,” said Haydn Jones, global lead of blockchain and crypto solutions at risk and financial advisory firm Kroll.
“We already know that cryptocurrencies can be highly regulatable. Much of the data associated with many leading cryptocurrencies is in publicly accessible digital ledgers, meaning that the FCA, or any other regulator around the world, should be able to examine the regulatory compliance of transactions or holdings at any time. Putting in place the frameworks to do so is a vital step in order to protect against criminal activity, but also to allow for everyone to benefit from the underlying technology that cryptocurrencies rely on.
“This underlying tech is already being used to explore new forms of tradable assets and securities, unlocking the efficiencies and reduced frictional costs that digital asset technology allows. This process has already begun, and we’ve seen a recent wave of high-profile institutions making investment in their digital asset infrastructure and partnering with cryptocurrency-focused organisations. The adoption of clear regulatory frameworks could well accelerate this.”
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