Unveiling IOSCO’s Crypto Policy Recommendations: Reinforcing Investor Protection and Market Integrity

Various Cryptocurrency Coins & Tokens FDIC IOSCO
Various Cryptocurrency Coins & Tokens

The International Organization of Securities Commissions (IOSCO) has initiated a conversation with the public on its proposed policy recommendations concerning the rapidly growing world of cryptocurrencies and digital assets. The action on Tuesday signifies a proactive step towards establishing a robust regulatory framework in this largely unregulated market.

IOSCO’s Recommendations: Comprehensive and Considered

IOSCO’s proposed policy outline comprises a total of 18 recommendations. These suggestions extensively tackle critical areas like the potential for market abuse, conflicts of interest, client asset safety, disclosures, and the specific risks associated with the crypto ecosystem. 

As mentioned in a press release, the proposed policies aim to confront the “prevalent concerns related to investor protection and market integrity” within crypto markets.

Last year, IOSCO, an international policy forum that unites securities regulators from approximately 130 nations, established the Fintech Task Force (FTF). The task force’s mission is to shape IOSCO’s regulatory approach towards fintech and crypto, with representatives from 27 out of 33 board member jurisdictions. The FTF is spearheaded by the Monetary Authority of Singapore, reflecting the global nature of this initiative.

The FTF comprises two operative working groups, one under the aegis of the U.K.’s Financial Conduct Authority. That group plans to release recommendations for crypto assets within the year. Another group, steered by the U.S. Securities and Exchange Commission, focuses on the burgeoning realm of decentralized finance (DeFi).

Echoing the Need for Tougher Crypto Regulations

The call for enhanced crypto regulations from global standard-setters has intensified, particularly after the fall of the stablecoin issuer Terra and the crypto exchange FTX. 

The Financial Stability Board is poised to release guidelines for stablecoins, while forthcoming global crypto rules will draw upon a joint FSB and International Monetary Fund (IMF) synthesis paper.

The international financial crimes watchdog, the Financial Action Task Force (FATF), recently urged the Group of Seven (G-7) advanced economies to enforce its recommended norms to prevent money laundering.

Jean-Paul Servais, the chairperson of IOSCO, emphasized the urgent need to eliminate the regulatory ambiguity surrounding crypto activities. His comment came as he announced the release of a consultation paper backed by the IOSCO Board. He remarked:

 “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.”

Recommendations Spotlight: Conflict of Interest and Client Asset Safety

Servais underlined that the suggestions concerning conflict of interest and safeguarding client assets might be the least shocking yet the most critical. 

For example, one such recommendation prompts regulators to consider barring crypto service providers from combining multiple functions within a legal entity or group of affiliated entities. 

This recommendation is in response to several crypto service providers undertaking various activities such as operating exchanges, engaging in proprietary trading in the same markets, and maintaining custody of clients’ assets.

IOSCO officials referenced the alleged mismanagement of client assets and conflicts of interest that precipitated the collapse of the crypto enterprise FTX, underscoring the need for these measures to ensure global consumer protection.

IOSCO’s Perspective on Crypto Legitimization

Servais asserted that IOSCO’s mission is to regulate financial activities and dismissed suggestions of treating crypto as gambling, a concept proposed by a group of U.K. lawmakers. He firmly stated that such an approach falls outside of IOSCO’s jurisdiction.

The public consultation period on these policy recommendations will conclude on July 31, allowing stakeholders a voice in shaping the future of crypto regulation.

None of the information on this website is investment or financial advice and does not necessarily reflect the views of CryptoMode or the author. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website by its authors or clients. Always conduct your research before making financial commitments, especially with third-party reviews, presales, and other opportunities.