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The International Organization of Securities Commissions (IOSCO) announced on Tuesday the introduction of the world’s first global approach to regulating crypto assets and digital markets. This development comes in response to lessons learned from last year’s collapse of exchange FTX, which raised concerns about consumer protection within the crypto industry.
Unlike traditional financial markets, the crypto sector largely operates without consistent global regulations, with each jurisdiction implementing its own rules. However, recent events, such as the crash of several crypto companies last year, have prompted regulators around the world to intervene and demand comprehensive rules for entities that combine various activities under one roof.
IOSCO will finalize global regulatory standards this year
According to Jean-Paul Servais, chairman of IOSCO, the 18 proposed measures aim to apply the established safeguards of traditional markets to eliminate conflicts of interest in various aspects of crypto transactions.
IOSCO intends to finalize this global standard by the end of the year and expects its 130 members, including leading regulatory bodies such as the US Securities and Exchange Commission, Japan Financial Services Agency, UK Financial Conduct Authority and Germany’s BaFin, to incorporate it. into their rule books.
This initiative seeks to eliminate fragmented regulations and prevent companies from exploiting regulatory gaps by playing the regulator against each other.
To ensure broad participation and accountability, IOSCO has launched a public consultation to gather public opinion on the proposed regulations. This move comes after the European Union recently implemented the world’s first comprehensive rules for crypto assets, increasing pressure on countries such as the United States to create their own regulatory framework.
As stated in the official document, The 18 proposed recommendations cover six important areas: conflict of interest due to vertical integration, market manipulation, insider trading, and fraud; cross-border risk and regulatory cooperation; custody and protection of client assets; operational and technological risks; and retail access, conformity, and distribution.
Meanwhile, IOSCO took into account existing definitional and interpretive jurisdictional differences to develop these recommendations, adopting a functional and economic approach to mitigating risk rather than relying on a one-size-fits-all taxonomy.
By mapping out existing IOSCO sector-specific standards, principles and recommendations for the infrastructure and activities of participants in the crypto asset market, IOSCO aims to align its policy framework with the identified risks.
Recognizing the varying regulatory landscape, the recommendations acknowledge that some jurisdictions already have frameworks in place to regulate crypto and digital assets, while others are in the process of developing such frameworks. In addition, responsibilities for oversight and regulation can be distributed among multiple regulators with complementary mandates and objectives.
Therefore, each jurisdiction should implement these recommendations within their existing or developing frameworks, taking into account the roles of different regulators and the outcomes achieved through their frameworks.
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