The International Organization of Securities Commissions (IOSCO) is taking measures to address market integrity and investor protection issues in the rapidly evolving crypto market. IOSCO recently published a consultation report where it laid out policy recommendations to promote the establishment of compliant trading markets for digital assets.
Crypto Braces for Regulatory Overhaul
The Crypto and Digital Assets Recommendations (CDA Recommendations) are based on IOSCO’s established approach for securities regulation, which emphasizes crucial market integrity and investor protection. The recommendations are not legally binding, but they offer guidance on the best practices for market regulation that could help boost investor confidence and bring more institutional investment into the crypto industry.
The recommendations cover six significant areas and are consistent with IOSCO standards. These areas include conflicts of interest arising from vertical integration, market manipulation, insider trading and fraud, cross-border risks and regulatory cooperation, custody and client asset protection, operational and technological risks, and retail access, suitability, and distribution.
IOSCO acknowledges jurisdictional differences and has developed a functional and economic approach to mitigate risks rather than creating a one-size-fits-all prescriptive taxonomy. The recommendations aim to set out an overarching principle and supporting guidance for all regulators, asking all IOSCO members to apply or adjust these guiding principles in a consistent and outcome-driven manner.
According to the report, regulatory frameworks (existing or new) should aim to achieve regulatory outcomes for investors’ protection and market integrity that are similar to those required in traditional financial markets. This step will facilitate a level playing field between crypto-assets and traditional financial markets, reducing the risk of regulatory arbitrage.
UK Treasury Committee Calls Cryptocurrency Trading To Be Classified As Gambling
The IOSCO recommended treating cryptocurrencies similarly to traditional financial assets. This suggestion goes against a recent proposal by the UK Parliament’s Treasury committee that called for regulating cryptocurrency trading as a form of gambling rather than a financial service.
The Treasury committee’s recommendation follows a fresh inquiry into the cryptocurrency industry, which found current regulations inadequate, and investors insufficiently protected. The committee suggested bringing cryptocurrency trading under the Gambling Commission’s remit to provide greater consumer protection. IOSCO’s recommendation is different, calling for cryptocurrencies to be treated similarly to traditional financial assets to facilitate a comparable market environment.
The crypto-asset industry has been dealing with regulatory uncertainty and a lack of clear guidelines. IOSCO’s recommendations represent a significant development for the industry by providing a framework for compliant markets. This move marks a significant step toward increasing transparency and reducing the risks associated with crypto-asset trading.
It is important to note that IOSCO’s recommendations are not legally binding, and individual jurisdictions must adopt them to have an impact. The industry is moving towards a more regulated and transparent future, and how individual jurisdictions will respond to the IOSCO recommendations remains to be seen.
Featured image from iStock, chart from TradingView.com
