IOSCO Consults on Policy to Regulate Global Crypto-Asset Markets
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.
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Keywords: International, Banking, Securities, Regtech, Crypto-Asset Service Providers, Cross-Border Activities, Investor Protection, Decentralized Finance, Crypto-Asset Regulation, IOSCO
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