International Watchdog offers the first set of global rules for the crypto industry

International securities watchdog IOSCO unveiled the world’s first approach to regulating crypto-asset and digital markets on Tuesday, drawing lessons from last year’s crash of the FTX stock exchange that fueled concerns about consumer protection.

The industry, which usually only has to comply with anti-money laundering controls, has called for a global approach to regulation as different jurisdictions follow their own rules.

The moves come after crypto exchange FTX began bankruptcy proceedings in the United States last November following a liquidity crunch.

This prompted action from regulators around the world, who said rules were needed for crypto “conglomerates”, such as FTX, which combine many activities under one roof with little safeguards for client assets. in order to put an end to conflicts of interest.

Tuesday’s plans represent a turning point in tackling the risks of crypto-assets such as bitcoin and ether, said Jean-Paul Servais, who chairs the International Organization of Securities Commissions (IOSCO).

“Crypto trade has been allowed to grow on a flawed basis and it needs to be fixed,” Servais told a news conference.

The proposed standards cover the management of conflicts of interest, market manipulation, cross-border regulatory cooperation, custody of crypto-assets, operational risks and treatment of retail clients.

“Recent world events have shown us why we need this work. It’s about making sure crypto is safe for the market,” said Matthew Long, director of digital assets at Britain’s Financial Conduct Authority.

Haydn Jones, global head of blockchain and crypto solutions at Kroll, said frameworks like those at IOSCO stop criminal activity and allow everyone to benefit from the technology behind crypto.

The 18 planned measures apply long-established safeguards in traditional markets to eliminate conflicts of interest between different parties in a crypto transaction.

The watchdog aims to finalize the standards by the end of the year and expects its 130 members worldwide to use them to fill gaps in their rules, eliminating fragmented regulation and the ability of companies to pit regulators against each other.

IOSCO, an umbrella group of regulators such as the United States Securities and Exchange Commission, the Financial Services Agency of Japan, the Financial Conduct Authority of the United Kingdom and BaFin of Germany, questions the public opinion on regulation.

The step follows the European Union’s finalization this month of the world’s first set of comprehensive rules, pressuring Britain, the United States and other countries to develop their own standards. .

Later in the summer, IOSCO will publish recommendations to regulate decentralized finance.

© Thomson Reuters 2023

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