The Board of the International Organization of Securities Commissions (IOSCO) has published a report on the issues and risks associated with crypto-asset trading platforms.
IOSCO is an international organization that represents most of the regulated securities exchanges around the world. The agency works closely with the G20 and the Financial Stability Board (FSB) on global regulatory reform.
In 2017, IOSCO published a report on Fintech that addressed digital assets or the use of blockchain technology for the issuance of tokens. IOSCO states:
“For this Final Report, crypto-assets are a type of private asset that depends primarily on cryptography and DLT or similar technology as part of its perceived or inherent value, and can represent an asset such as a currency, commodity or security, or be a derivative on a commodity or security.”
The IOSCO report sets out key considerations intended to assist regulatory authorities in evaluating digital asset trading platforms, including:
- Access to CTPs [Crypto Trading Platforms]
- Safeguarding participant assets
- Conflicts of interest
- Operations of CTPs
- Market integrity
- Price discovery
- Technology including cybersecurity
IOSCO believes that many issues are similar to traditional securities markets but “may be heightened” due to business models.
If a digital asset is deemed to be a security it should be treated as one – an obvious request.
One huge challenge is the global nature of crypto. IOSCO believes that “effective information sharing and cooperation is important to manage the risks associated with this global trading of crypto-assets.”
IOSCO said it will continue to monitor the evolution of the markets for digital assets to “ensure the issues, risks and key considerations identified in this report remain relevant and appropriate.”
The report does not include an analysis of the criteria that are used by regulatory authorities to determine whether a crypto-asset falls within its remit – IE it should be considered a security – a point of ongoing discussion.
IOSCO Issues, Risks and Regulatory Considerations Relating ti Crypto-Asset Trading Platforms February 2020