In May of 2019, the International Organization of Securities Commissions (IOSCO) kicked off a consultation on “crypto-asset trading platforms” or “CTPs.” The goal of the Consultation is to assist IOSCO members in evaluating the issues and risks relating to trading in digital assets and the exchanges that facilitate these markets. IOSCO represents 95% of the world’s securities markets in more than 115 jurisdictions which also includes the United States.
IOSCO states that fostering innovation should be balanced with “the appropriate level of regulatory oversight.” If a digital asset is a security then it simply falls under existing security law. But if the crypto-asset is not deemed to be a security then questions arise as to how to best regulate the novel asset.
Some jurisdictions have established bespoke rules for digital assets. Others are in the process of doing so and some are doing little at all. What is clear, is that there is a good degree of regulatory friction emerging around the world which makes cross border regulation, and issuance, a bigger challenge.
The consultation closed on July 29th with a report expected to follow later this year.
Squeaking just under the deadline to provide feedback is the US-based Digital Chamber of Commerce, a group that says it represents over 200 blockchain-based firms around the world.
In a blog post from yesterday, the Digital Chamber of Commerce outlined their recommendations as to how to master the balancing act of regulation and innovation in the emerging blockchain sector:
- Recognize that a broad array of crypto-assets has emerged, and even more will emerge over time, not all of which are crypto-asset securities.
- Regulatory guidelines regarding the appropriate categorization and regulatory treatment of these assets will provide needed clarity to enable implementations of blockchain technology to flourish.
- Regulation should be technology-neutral. Crypto-asset securities have the same legal character as traditional securities.
The DCC states:
“… we believe that the IOSCO guidance in this area should be specific to crypto-asset securities and CTPs that trade crypto-asset securities and recognize that transactions in non-security crypto-assets should not be subject to securities laws, although there are other regulatory regimes that likely apply depending on the jurisdiction.”
The feedback continues to outline the Chamber’s perspective on how digital securities should be treated.
It is interesting to note that the UK Financial Conduct Authority (FCA), an IOSCO member, published its regulatory approach to crypto-assets last week. The FCA’s guidance created an opportunity for non-security token issuance and trading. The FCA added that it hoped a more globally harmonized approach will emerge:
The FCA stated:
“We will continue to work closely with other regulatory agencies; both bilaterally as well as multilaterally through bodies such as the Global Financial Innovation Network (GFIN), the International Organization of Securities Commissions (IOSCO), the European Commission (EC) and the European Supervisory Authorities (ESA) to encourage regulators to approach cryptoassets in a consistent way.”
The letter states that CTPs offering of crypto-asset securities should be engaged and part of the discussion regarding and forthcoming guidance.
The Digital Chamber of Commerce letter is embedded below.