IOSCO crypto report urges international cooperation

The recommendations, described as principles-based and outcomes-focused, are directed towards crypto-asset service providers.

The Policy Recommendations for Crypto and Digital Asset Markets Final Report, issued by IOSCO (The International Organization of Securities Commissions) last week, has 18 policy recommendations covering six key areas:

  1. conflicts of interest arising from vertical integration of activities and functions;
  2. market manipulation, insider trading and fraud;
  3. cross-border risks and regulatory cooperation;
  4. custody and client asset protection;
  5. operational and technological risk; and
  6. retail access, suitability, and distribution.

“One of IOSCO’s goals is 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,” the report says. A separate report on DeFi will follow.

The recommendations are in accordance with a roadmap published in July 2022, which established a 27-member board-level Fintech Task Force (FTF) and came shortly after the Terra/Luna episode and ensuing market turmoil involving crypto-asset trading, lending and borrowing platforms.

A consultation earlier this year also emphasized the importance of cross border cooperation and enhanced coordination from regulators.

International framework

“This report is a key component of the international framework for these markets envisaged by the G20 and FSB,” Jean-Paul Servais, IOSCO Chair, said. “Next, our attention turns to ensuring the adoption and implementation of the recommendations to support optimal consistency in the way crypto-asset markets and activities are regulated across IOSCO member jurisdictions.”

The report dedicates a section to stablecoins, and says “the recommendations apply to all crypto-assets including so-called stablecoins in seeking to deliver regulatory outcomes of investor protection and market integrity. The unique characteristics and idiosyncratic considerations presented by stablecoins are sufficiently addressed in the proposals and these have been maintained without amendment.”

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.