Crypto should mimic TradFi rules: Global securities regulator IOSCO
According to the U.S. SEC, IOSCO members together regulate more than 95% of the world’s securities markets.
A major global securities watchdog, the International Organization of Securities Commissions (IOSCO), is working to help policymakers regulate cryptocurrency more effectively.
IOSCO on May 23 released a set of crypto-related regulatory recommendations as part of a consultation report developed by the IOSCO Board’s Fintech Task Force.
The report includes 18 policy recommendations to help global securities regulators address market integrity and investor protection concerns arising from crypto. Following the consultation period through the end of July, IOSCO plans to finalize the recommendations by late 2023.
In Chapter 1, IOSCO set out an overarching recommendation addressed to all regulators, advising policymakers not to create any disparities in regulating cryptocurrency and traditional finance.
Crypto regulators around the world should seek to achieve regulatory outcomes that are “same as, or consistent with those required in traditional financial markets,” IOSCO suggested. According to the authority, such recommendations should help facilitate a “level-playing field between crypto-assets and traditional financial markets” and reduce the risk of regulatory arbitrage. IOSCO wrote:
“One of IOSCO’s goals is to promote greater consistency with respect to how IOSCO members approach the regulation and oversight of crypto-asset activities, given the cross-border nature of the markets, the risks of regulatory arbitrage and the significant risk of harm to which retail investors continue to be exposed.”
IOSCO also encouraged global regulators to analyze the applicability and adequacy of their crypto regulatory frameworks and the extent to which they behave like substitutes for regulated financial instruments. Regulators should apply such an approach to all types of crypto assets, including stablecoins like Tether (USDT), the authority noted.
Established in 1983, IOSCO is an association of organizations regulating the world’s securities and futures markets. IOSCO’s Board is the governing and standard-setting body of its constituent members. It comprises 35 securities regulators worldwide, including the United States Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission.
According to the U.S. SEC, IOSCO members regulate more than 95% of the world’s securities markets. “The SEC is an active member of the IOSCO Board,” the U.S. securities regulator wrote, adding that one of the primary functions of the IOSCO Board is to review major securities regulatory issues and to develop appropriate policy responses.
Related: SEC Chair Gensler claps back at Coinbase, says crypto rules already exist
While IOSCO called on regulators to create a regulatory balance between traditional finance and the crypto industry, some of its members have been criticized for not providing enough clarity on crypto regulation.
In April, crypto-friendly Congressman Tom Emmer slammed U.S. SEC Chair Gary Gensler for his approach to cryptocurrency regulation, labeling him a “bad faith regulator.” Previously, Emmer also pointed out “apparent inconsistencies” in the SEC’s crypto regulation that caused the authority to miss massive crypto industry collapses like Terra, Celsius, Voyager and FTX.
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