2023-05-24 14:14:12
The International Organization of Securities Commissions (IOSCO) announced on Tuesday the introduction of the world’s first global approach to regulating crypto assets and digital markets.. This development comes in response to lessons learned from the FTX exchange crash last year, which raised consumer protection concerns within the crypto industry.
Unlike traditional financial markets, the crypto sector has largely operated without consistent global regulations, with each jurisdiction implementing its own rules. However, recent events, such as the collapse of several companies in the sector last year, have led regulators around the world to step in and demand comprehensive rules for entities that combine various activities under one roof.
IOSCO WILL FINALIZE GLOBAL REGULATORY STANDARDS THIS YEAR
According to Jean-Paul Servais, the president of IOSCO, the 18 proposed measures they aim to apply well-established safeguards from traditional markets to eliminate conflicts of interest in different aspects of crypto transactions.
IOSCO intends to finalize these global standards by the end of the year and hopes that its 130 memberswhich include prominent regulators such as the US Securities and Exchange Commission, the Japan Financial Services Agency, the UK Financial Conduct Authority, and Germany’s BaFin, incorporate them into their respective rule books.
This initiative seeks to eliminate fragmented regulation and prevent companies from exploiting regulatory loopholes by playing regulators against each other.
To ensure broad participation and accountability, IOSCO has launched a public consultation to gather public input on the proposed regulations. This move comes after the European Union recently implemented the world’s first comprehensive rules for crypto assets, increasing pressure on countries like the United States to establish their own regulatory frameworks.
As described in the official document, the 18 proposed recommendations cover six crucial areas: conflicts of interest resulting from vertical integration, market manipulation, insider trading and fraud; cross-border risks and regulatory cooperation; custody and protection of client assets; operational and technological risk; and retail access, suitability and distribution.
In the meantime, IOSCO took into account existing defining jurisdictional and interpretation differences in developing these recommendations, taking a functional and cost-effective approach to risk mitigation rather than relying on a generalized taxonomy.
By mapping IOSCO’s existing sector-specific standards, principles and recommendations to the infrastructure and activities of participants in the crypto asset markets, IOSCO sought to align its policy framework with the identified risks.
Acknowledging the different regulatory landscapes, the recommendations acknowledge that some jurisdictions already have frameworks in place for regulation of crypto and digital assets, while others are in the process of developing such frameworks. Besides, supervisory and regulatory responsibility may be distributed among multiple regulators with complementary mandates and objectives.
Therefore, each jurisdiction should implement these recommendations within their existing or developing frameworks, considering the roles of different regulators and the results achieved through their frameworks.
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