In a major initiative designed to improve global standards of regulation of crypto-assets, IOSCO has set out how clients should be protected and how crypto trading should meet the standards that apply in public markets. The Recommendations cover six key areas, consistent with the IOSCO Objectives and Principles for Securities Regulation and relevant supporting IOSCO standards, recommendations, and good practices.
We bring the commentary from ETC Group CEO Bradley Duke, ARK36 Chairman Mikkel Morch and xVentures Partner Zohair Dehnadi on the International securities watchdog International Organization of Securities Commissions (IOSCO) unveiling the first global plans to regulate crypto.
Bradley Duke, co-CEO at ETC Group, commented,
“At ETC Group we welcome any well considered regulation or Digital Assets guidance that increases investor protections as this helps to bring confidence and stability to this nascent sector. The IOSCO global approach is definitely a step in the right direction.”
Zohair Dehnadi, Partner at www.xventures.de, said,
“In its current state, the Web3 industry requires a soft reset. We have seen scams and rug pulls, unprofessionalism and short-sighted greed present serious challenges for the entire industry – however, proposed standards covering conflicts of interest, cross-border regulatory cooperation, custody of cryptoassets, operational risks and treatment of retail customers could go a long way towards directly addressing consumer protection concerns.
“Critical conversations are needed to re-establish trust in the decentralisation movement – particularly after the public collapse of the FTX exchange last year. At X Ventures, we were drawn to the drive and passion of the decentralisation movement and firmly believe it offers a legitimate chance to change the world for the better. Adopting a global approach to regulating cryptoasset and digital markets is a great step and we encourage C-level executives, founders, influencers, legal experts and regulatory authorities to unite in working towards a common goal.”
Mikkel Morch, Chairman and Non-Executive Director at ARK36, commented,
In a significant move towards strengthening the regulation of the cryptocurrency market, the International Organization of Securities Commissions (IOSCO) unveiled the first global approach to regulating cryptoassets and digital markets. This initiative comes in response to the collapse of the FTX exchange last year, which raised concerns about consumer protection and highlighted the need for a coordinated regulatory framework.
Until now, the cryptocurrency industry has largely operated with limited oversight, primarily focusing on anti-money laundering checks. However, with different jurisdictions adopting their own rules, the lack of harmonisation has created a fragmented regulatory landscape. The proposed global standards aim to address this issue and provide a comprehensive framework that will enhance investor protection and market integrity.
The bankruptcy proceedings initiated by FTX in the United States last November triggered global regulators’ intervention due to a liquidity crisis. These events served as a wake-up call for the industry and highlighted the urgency of establishing a coordinated global approach to cryptocurrency regulation.
The recommendations put forth by IOSCO represent a significant turning point in the industry and could indeed mark a step towards mitigating the risks associated with investor protection and market integrity. The proposed measures cover a wide range of areas, including conflict of interest, market manipulation, cross-border regulatory cooperation, custody of cryptoassets, operational risks, and the treatment of retail customers.
By applying long-established safeguards from mainstream markets, the proposed standards aim to eliminate conflicts of interest between different parts of a crypto transaction. IOSCO plans to finalize these standards by the end of the year, urging its 130 members worldwide to swiftly integrate them into their rulebooks to address existing regulatory gaps.
IOSCO, an umbrella group comprising regulators such as the U.S. Securities and Exchange Commission, Japan’s Financial Services Agency, Britain’s Financial Conduct Authority, and Germany’s BaFin, is actively seeking public opinion on the proposed regulations. This inclusive approach ensures that various stakeholders, including investors and industry experts, have the opportunity to contribute their insights and expertise.
This move by IOSCO follows the European Union’s recent implementation of the world’s first comprehensive set of rules for cryptocurrencies. Consequently, there is mounting pressure on other major economies, including the United States and the United Kingdom, to develop their own regulatory frameworks to keep pace with global standards.
As the cryptocurrency market continues to grow in size and influence, establishing a robust global regulatory framework is essential to safeguard investors’ interests and ensure the long-term stability and integrity of the market. While the proposed standards hold the promise of enhancing investor protection, it is important to strike the right balance between regulation and innovation to foster continued growth and development in this dynamic industry.
Public Consultation
IOSCO has opened a public consultation on its recommendations and aims to finalise them by the end of the year. Thereafter, it expects that jurisdictions will review their current regulatory frameworks to ensure that they comply with the standards and fix any gaps promptly.
IOSCO is the leading international policy forum for securities regulators and is recognized as the global standard-setter for securities regulation. The organization’s membership regulates more than 95% of the world’s securities markets in some 130 jurisdictions, and it continues to expand.
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