IOSCO proposes the first set of global rules for crypto sector

The International Organization of Securities Commissions (IOSCO), the global regulatory body for securities markets, announced a comprehensive consultation aimed at establishing worldwide standards for crypto-asset regulation. The move, a significant bid to bolster global regulation of the crypto markets, delineates how consumers should be protected and crypto trading should adhere to public market standards.

IOSCO Chairperson Jean-Paul Servais emphasised the importance of this consultation paper, which received unanimous backing from the IOSCO Board. “Today’s consultation paper is a result of intense regulatory risk analysis, information sharing, and capacity building,” Servais said. “It marks a turning point in addressing clear and immediate risks to investor protection and market integrity.”

IOSCO, with 130 members that regulate more than 95% of the world’s securities markets, is uniquely positioned to deliver an effective and universally consistent set of policy recommendations. Servais expressed confidence that the strong support of the IOSCO Board would assure the prompt implementation of the recommendations by all members to reduce the risk of regulatory arbitrage.

LIM Tuang Lee, Chairperson of the IOSCO Board-Level Fintech Task Force, echoed Servais’s sentiments. He stated that the recommendations set boundaries for crypto-asset service providers and emphasised the necessity of serious regard for clients’ rights to have their assets meticulously managed and accounted for.

The initiative comes as a response to an industry-wide call for global regulatory harmonisation, given the inherent cross-border nature of crypto-asset markets. The industry, currently bound mostly by anti-money laundering regulations, has experienced inconsistencies due to differing jurisdictional rules.

The move also follows the controversial collapse of the FTX exchange last year, which led to a global concern over consumer protection. The incident highlighted the need for robust regulatory mechanisms to prevent such market disruptions.

IOSCO’s proposed standards cover a range of areas, including conflicts of interest, market manipulation, cross-border regulatory cooperation, custody of crypto assets, operational risks, and treatment of retail customers. The goal is to incorporate the established safeguards from mainstream markets to mitigate conflicts of interest within a crypto transaction.

IOSCO has launched a public consultation on its recommendations and aims to finalise them by the end of the year. The organisation anticipates that jurisdictions will promptly review their regulatory frameworks to ensure compliance and address any gaps.

The move by IOSCO follows the recent finalisation of the world’s first comprehensive crypto-asset regulation rules by the European Union, further intensifying pressure on the UK, the US, and other countries to establish their own regulatory norms.