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International Securities Watchdog IOSCO Proposes Global Standards for Cryptoasset and Digital Market Regulation

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Geeta Pillai
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The International Organization of Securities Commissions (IOSCO) announced on Tuesday a groundbreaking global approach to regulating cryptoassets and digital markets. The move comes in response to lessons learned from the collapse of the FTX exchange last year, which raised significant concerns over consumer protection and the need for uniform regulations in the industry. Crypto businesses have been advocating for a cohesive global regulatory framework as different jurisdictions currently follow their own rules, leading to fragmentation and potential risks.

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Lessons from FTX Exchange Collapse Drive Global Regulation Efforts

The bankruptcy proceedings of the FTX exchange in the United States following a liquidity crisis in November last year triggered widespread intervention from regulators worldwide. The incident shed light on the necessity of establishing rules for crypto "conglomerates" like FTX, which engage in multiple activities under one roof with limited safeguards for customer assets.

The lack of oversight can create conflicts of interest and compromise consumer protection. Jean-Paul Servais, Chair of IOSCO, emphasized that the proposed standards represent a pivotal moment in addressing risks associated with cryptoassets such as bitcoin and ether.

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Proposed Standards Address Key Concerns and Safeguard Market Participants

The newly proposed standards encompass a range of crucial aspects including handling conflicts of interest, combating market manipulation, fostering cross-border regulatory cooperation, ensuring secure custody of cryptoassets, managing operational risks, and enhancing protection for retail customers. Industry analysts like Haydn Jones, Global Lead of Blockchain and Crypto Solutions at Kroll, are of the opinion that robust frameworks like those proposed by IOSCO help prevent criminal activities and promote the widespread benefits of crypto technology.

IOSCO Seeks to Eliminate Fragmented Regulation and Establish Global Norms

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The 18 measures outlined by IOSCO aim to bring established safeguards from mainstream markets to the crypto sector, effectively eliminating conflicts of interest between different parts of a crypto transaction. IOSCO aims to finalize these standards by the end of the year and expects its 130 worldwide members, including regulatory bodies such as the U.S. Securities and Exchange Commission, Japan's Financial Services Agency, Britain's Financial Conduct Authority, and Germany's BaFin, to incorporate them into their respective rulebooks.

This unified approach seeks to eliminate fragmented regulation and prevent firms from exploiting regulatory discrepancies. IOSCO is currently seeking public opinion on the proposed regulations. In addition, later this summer, the organization plans to issue recommendations for the regulation of decentralized finance.

As the European Union recently finalized the world's first comprehensive set of rules for cryptoassets, pressure is mounting on other countries, including the United States and the United Kingdom, to develop their own regulatory norms. The global efforts by IOSCO and the EU signal a growing recognition of the need for consistent regulations to ensure the stability, security, and integrity of cryptoasset and digital markets.

consumer protection CryptoAssets Lessons Learned Crypto Regulation Global Approach IOSCO Digital Markets FTX Exchange
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