The International Organization of Securities Commission (IOSCO) has published a paper making policy recommendations on dealing with digital assets or crypto. The consultation incorporates 18 different recommendations that IOSCO states it will finalize during the last quarter of this year.
IOSCO published a digital asset roadmap in 2022.
The recommendations are “principles-based” and “outcomes-focused,” targeting digital asset exchanges and other intermediaries.
IOSCO applies its global standard for securities regulation to address risks and challenges within the crypto sector.
Of note is the fact that IOSCO does not attempt to tackle the concept of decentralized finance or “DeFi” – a concept that can challenge traditional intermediary structures that provide guardrails for the securities markets. A DeFi consultation is in the works and is expected to be published later this year.
IOSCO emphasizes the need for global regulators to work together and recommend “enhanced cooperation among regulators.”
IOSCO Chairman Jean-Paul Servais, said that G7 Finance Ministers and Central Bank missive have reminded them that the time has come to put an end to the regulatory uncertainty that characterizes crypto activities.
“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. 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 credible deterrence of non-compliant actors.”
Earlier this month, G7 Finance Ministers stated that “effective monitoring, regulation, and oversight are critical to addressing financial stability and integrity risks posed by crypto-asset activities and markets while supporting responsible innovation.” The G7 also mentioned the forthcoming recommendations from the Financial Stability Board (FSB) and said they support the FATFs travel rule.
LIM Tuang Lee, Chair of the IOSCO Board-Level Fintech Task Force, said that “crypto asset service providers” (CASPs) must address shortcomings in the industry and protect investors.
“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.”
Chris Perkins, President and Managing Partner at CoinFund, shared his thoughts on the IOSCO consultation:
“In April, CoinFund released a whitepaper where we put forth ten policy principles for the digital financial system. As such, we remain fully supportive of principles-based regulation and commend IOSCO for their desire for a globally synchronized approach that seeks to protect client assets, offers reasonable and transparent disclosures, and roots out abusive behaviors. We further commend IOSCO for not commingling DeFi in today’s policy paper covering crypto asset service providers (CASPs). Finally, we are hopeful that subject matter experts including trade associations respond to the numerous queries in the proposal in order to help inform the best policy outcomes. Clearly, as global policies for digital assets are crystalized, details will matter.”
The public consultation is open until July 31, 2023. Comments should be sent to c[email protected]
The 18 recommendations are available in the paper (below).