The International Organization of Securities Commissions (IOSCO) has introduced a groundbreaking global framework for regulating crypto assets and digital markets. This move comes in response to the lessons learned from the FTX exchange collapse last year and aims to address concerns regarding consumer protection in the industry.
Regulating Crypto “Conglomerates” and Mitigating Risks
The bankruptcy proceedings of FTX, a prominent crypto exchange, triggered the involvement of regulators worldwide. They highlighted the necessity of rules for crypto “conglomerates” like FTX, which consolidate multiple activities without sufficient safeguards for customer assets, leading to potential conflicts of interest.
Jean-Paul Servais, Chairman of IOSCO, considers the newly proposed standards as a crucial turning point in mitigating risks associated with crypto assets such as bitcoin and ether. Servais emphasizes the need to rectify the flawed foundation on which the crypto business has been allowed to expand.
Key Areas Covered by the Proposed Standards
The proposed standards put forth by IOSCO encompass several key areas to ensure the regulation of crypto assets and digital markets. These areas include managing conflicts of interest, preventing market manipulation, facilitating cross-border regulatory cooperation, ensuring secure custody of crypto assets, addressing operational risks, and safeguarding the interests of retail customers.
Importance and Implications of the Proposed Regulations
Matthew Long, Director of Digital Assets at the Financial Conduct Authority in Britain, highlights the significance of the proposed regulations in light of recent global events. He states that the regulations aim to ensure the safety of crypto in the market.
The introduction of a comprehensive global framework by IOSCO puts pressure on countries like Britain and the United States to establish their own regulatory norms. It follows the recent finalization of the world’s first comprehensive set of rules for crypto by the European Union.
Future Plans and Commitment to Addressing Industry Changes
IOSCO plans to issue recommendations for regulating decentralized finance (DeFi) in the coming months, demonstrating its commitment to addressing the evolving landscape of the crypto industry. The organization seeks public input on these regulations, mirroring the approach taken by the European Union, and expects its 130 members worldwide, 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 adopt them.
The aim of IOSCO’s global framework is to harmonize regulations globally, eliminate fragmented oversight, and prevent firms from exploiting regulatory disparities. It seeks to create a safer and more transparent environment for crypto assets and digital markets.
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