IOSCO Presents Comprehensive Crypto Guidelines for Regulation

Sahana Kiran
Source – Unsplash

With the dynamic nature of the cryptocurrency industry, the importance of regulations has become increasingly evident. Recognizing this, the International Organization of Securities Commissions [IOSCO] has assumed the responsibility of overseeing and regulating the market. Consequently, this global regulatory body has recently released a comprehensive set of guidelines intended to assist authorities in strengthening their regulatory standards in the crypto sector.

IOSCO’s consultation report presents a series of 18 policy recommendations that the organization intends to finalize in early Q4, 2023. The aim of these recommendations is to promote increased consistency in regulatory frameworks and oversight across its member jurisdictions. IOSCO secretary-general, Martin Moloney said,

“The diversity we’ve got at the moment across jurisdictions is not that they’re moving in different directions, but that they haven’t gone far enough in the direction that they all know they should go in. What we would say to jurisdictions is just push ahead. They’ve all got different legal frameworks, different regulatory frameworks. Just push ahead, do it to this standard as quickly as you can . . . It’s not helpful for anyone to hold back at this point.”

While IOSCO does not possess the authority to enforce the adoption of its rules by regulators, Moloney, expressed confidence in the implementation of the proposed recommendations by the organization’s members. With a membership spanning 130 countries and encompassing 95 percent of global financial markets, IOSCO exerts considerable influence.

So what does IOSCO’s latest 18-point plan cover?

The policy recommendations put forth by IOSCO encompass a broad spectrum of activities within crypto markets. These recommendations specifically address activities involving Crypto Asset Service Providers [CASPs] in various stages. This includes offering, admission to trading, ongoing trading, settlement, market surveillance, custody, as well as marketing and distribution.

The scope of these recommendations extends to both advised and non-advised sales. This further ensures that retail investors are adequately protected and regulated across all relevant aspects of the crypto industry.

Here’s what is being left out

The current proposed recommendations by IOSCO do not encompass activities, products, or services offered within the DeFi space. However, the regulator has a separate workstream, known as the FTF DeFi workstream. This is dedicated to examining issues related to DeFi. The workstream is expected to release a consultation report with its own set of proposed recommendations specifically targeting DeFi later in the summer.

Retail investors are the primary focus of IOSCO

There are several aspects that IOSCO’s latest proposal addresses. However, retail investors seem to be fetching the primary attention here. The documentation addresses the reason behind the same and said,

“Global retail investor exposure to crypto-assets has grown exponentially in recent years, as have retail investor losses due, not only to market conditions but also financial crime, fraud, money laundering, and other illegal crypto-asset market practices. The fragility and interconnectedness of the crypto-asset market continue to leave entities and investors exposed to significant losses triggered by all too frequent shock events.”

Additionally, Bank for International Settlements [BIS] revealed that there are over 200 crypto trading apps in over 95 countries. From a period of August 2015 to December 2022, most Bitcoin [BTC] holders have been enduring a loss. Therefore, taking into consideration retail investors, CASPs are likely to be under the spotlight.

The implementation of these laws and regulations has the potential to foster greater adoption of cryptocurrencies, as it would provide a sense of safety and security for investors.