IOSCO Issues Consultation on Global Approach to Regulation of Crypto and Digital Assets | Practical Law

IOSCO Issues Consultation on Global Approach to Regulation of Crypto and Digital Assets | Practical Law

The International Organization of Securities Commissions (IOSCO) issued a consultation providing policy recommendations for global regulation of crypto and digital asset markets.

IOSCO Issues Consultation on Global Approach to Regulation of Crypto and Digital Assets

by Practical Law Finance
Published on 31 May 2023 • USA (National/Federal)
The International Organization of Securities Commissions (IOSCO) issued a consultation providing policy recommendations for global regulation of crypto and digital asset markets.
On May 23, 2023, the International Organization of Securities Commissions (IOSCO) published a consultation on the crypto and digital asset markets to address the activities of crypto-asset service providers (CASP). The consultation is directed to IOSCO members, which include global securities regulators in major financial jurisdictions, and is consistent with IOSCO's crypto-asset roadmap for 2022-2023 (see Legal Update, Global Standard-Setting Bodies Issue Releases Addressing International Crypto-Asset Issues).
Noting the growth in global retail investor exposure and retail investor losses involving crypto-assets, the IOSCO consultation is designed to promote investor protection and integrity in the crypto and digital asset markets. The consultation's recommendations fall within the following six areas:
  • Conflicts of interest arising from vertical integration of activities and functions.
  • Market manipulation, insider trading and fraud.
  • Cross-border risks and regulatory cooperation.
  • Custody and client asset protection.
  • Operational and technological risk.
  • Retail access, suitability, and distribution.
IOSCO specific recommendations include, among others, that regulators in IOSCO member jurisdictions:
  • Use new or existing frameworks to regulate and oversee crypto-asset trading.
  • Require CASPs to have effective governance and organizational structures that identify, manage, and mitigate conflicts of interest.
  • Require pre-trade and post-trade disclosures by CASPs to achieve regulatory outcomes consistent with those of traditional financial markets.
  • Require CASPs to manage and mitigate conflicts of interest surrounding the issuance, trading, and listing of crypto-assets.
  • Bring enforcement actions against offenses involving fraud and market abuse in crypto-asset markets consistent with actions brought in traditional financial markets for abusive practices, including:
    • disclosure of material, non-public information;
    • insider trading; and
    • market manipulation.
  • Share information and cooperate with regulators in other jurisdictions with respect to crypto-asset issuance and trading through cooperation arrangements and other mechanisms.
  • Require CASPs to segregate client assets from the CASP’s proprietary assets.
The deadline for comment on the consultation is July 31, 2023. IOSCO plans to finalize the recommendations in Q4 of 2023.