The International Organization of Securities Commissions (IOSCO) is seeking comments, until July 31, 2023, on a set of policy recommendations to regulate and supervise the global crypto-asset markets.
The proposed recommendations have been developed under the stewardship of the IOSCO Board’s Fintech Task Force in accordance with CryptoAsset Roadmap published in June 2022. The proposed recommendations aim to promote greater consistency with respect to how IOSCO members approach the regulation and oversight of crypto-asset activities, given the cross-border nature of the markets, the risks of regulatory arbitrage and the significant risk of harm to which retail investors continue to be exposed. IOSCO is also seeking to encourage optimal consistency in the way crypto-asset markets and securities markets are regulated within individual IOSCO jurisdictions, in accordance with the principle of "same activities, same risks, same regulatory outcomes." The proposed eight recommendations cover the following six key areas, consistent with the IOSCO standards:
- Conflicts of interest arising from vertical integration of activities and functions
- Market manipulation, insider trading and fraud
- Cross-border risks and regulatory cooperation
- Custody and client asset protection
- Operational and technological risk, and
- Retail access, suitability, and distribution
The proposed recommendations are principles-based and outcomes-focused and are aimed at the activities performed by crypto-asset service providers (CASPs). The crypto-asset service providers apply IOSCO’s widely accepted global standards for securities markets regulation to address key issues and risks identified in crypto-asset markets. The proposed recommendations are activities-based and follow a ‘lifecycle’ approach in addressing the key risks. The proposed recommendations also cover the need for enhanced cooperation among regulators and aim to provide a critical benchmark for IOSCO members to cooperate, coordinate and respond to cross-border challenges in enforcement and supervision, including regulatory arbitrage concerns, that arise from global crypto-asset activities conducted by crypto-asset service providers that offer their services, often remotely, into multiple jurisdictions.
While the proposed recommendations are not directly addressed to markets participants, crypto-asset service providers and all participants in crypto-asset markets are strongly encouraged to carefully consider the expectations and outcomes articulated through the proposed recommendations and the respective supporting guidance in the conduct of registered/licensed, and cross-border activities. IOSCO aims to finalize these proposed policy recommendations to address market integrity and investor protection issues in crypto-asset markets by early fourth quarter of 2023. The proposed recommendations do not cover activities, products or services provided in the decentralized finance area. The Fintech Task Force decentralized finance workstream is considering issues in relation to the decentralized finance and plans to publish a consultation report with the proposed recommendations later this Summer.
Keywords: International, Banking, Securities, Regtech, Crypto-Asset Service Providers, Cross-Border Activities, Investor Protection, Decentralized Finance, Crypto-Asset Regulation, IOSCO
Previous ArticleFSB Issues Statement on USD LIBOR Transition, Issues Other Updates
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.