The International Organization of Securities Commissions (IOSCO), a leading international body of securities regulators, recently published an influential report titled ‘Policy Recommendations for Crypto and Digital Asset Markets Consultation Report.’
This ground-breaking document provides 18 recommendations, each of them structured to offer guidance to regulators worldwide on handling the burgeoning crypto and digital asset markets. The primary objective is to ensure investor protection and market integrity are consistent with those of traditional financial markets.
One of the main points of the report is the suggestion for regulatory frameworks to examine whether crypto-assets can substitute for regulated financial instruments. IOSCO encourages regulators to analyze if investors have replaced other financial investment activities with crypto-asset investments.
Additionally, the report urges Crypto-Asset Service Providers (CASPs) to set effective governance and organizational requirements. This move aims to counteract potential conflicts of interest that may arise due to their multi-faceted roles within the industry.
The document’s recommendations extend to order handling, trade disclosures, and the listing of crypto-assets. The report suggests that CASPs should adopt transparent standards for the listing and delisting of crypto-assets, which would lead to more informed decision-making by investors.
In response to the cross-border character of crypto-asset trading, IOSCO’s report advocates for enhanced international cooperation. This recommendation is aimed at ensuring effective supervision and enforcement, reducing the risk of money laundering, and addressing investor protection and market integrity issues.
Significant attention is also given to the custody of client monies and assets. The report offers guidance to safeguard these resources and mitigate risks related to asset segregation and the re-use of assets.
Another area of focus is the management of operational and technological risks associated with distributed ledger technology (DLT) and smart contracts. In addition, the report includes a dedicated section on retail investors, stressing the need for diligent assessment and onboarding.
Lastly, IOSCO addresses stablecoins, pointing out their unique features and associated risks. It provides further guidance on stablecoin disclosures and the custody of reserve assets.
IOSCO’s report is expected to have a significant impact on the crypto and digital asset markets worldwide. Its comprehensive recommendations should assist regulators in their task of addressing the challenges posed by these rapidly evolving markets.