The International Organization of Securities Commissions (IOSCO), a leading international body of securities regulators, recently published an influential report titled ‘Policy Recommendations for the Crypto and Digital Assets Market Consultation Report’.
This groundbreaking document provides 18 recommendations, each structured to offer guidance to regulators around the world on managing the booming markets for digital and crypto assets. The main objective is to ensure that investor protection and market integrity are consistent with those of traditional financial markets.
One of the main points of the report is the suggestion of regulatory frameworks to examine whether crypto assets can replace regulated financial instruments. IOSCO encourages regulators to look at whether investors have replaced other financial investment activities with investments in crypto assets.
Furthermore, the report urges crypto asset service providers (CASPs) to establish effective organizational and governance requirements. This move is aimed at countering potential conflicts of interest that may arise due to their multifaceted 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 nature of crypto asset trading, the IOSCO report advocates for greater international cooperation. This recommendation is intended to ensure effective supervision and enforcement, reduce the risk of money laundering, and address investor protection and market integrity issues.
Special attention is also paid to the custody of clients’ money and assets. The report offers guidance for safeguarding these resources and mitigating risks related to asset segregation and asset reuse.
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 for retail investors, which highlights the need for diligent assessment and onboarding.
Lastly, IOSCO addresses stablecoins, pointing out their unique characteristics and associated risks. Provides further guidance on stablecoin disclosures and custody of reserve assets.
The IOSCO report is expected to have a significant impact on the crypto and digital asset markets around the world. Its comprehensive recommendations should assist regulators in their task of addressing the challenges posed by these rapidly changing markets.