3 - 4 minute read
The International Organization of Securities Commissions (IOSCO) is set to launch a consultation report for cryptocurrency regulation in the current quarter. IOSCO’s Fintech Task Force plan is dedicated to decentralized assets, with a particular focus on Crypto and Digital Assets (CDA) and decentralized finance (DeFi). The final recommendations from the organization are scheduled to be published by the end of 2023.
In both CDA and DeFi, IOSCO’s focus will be on investor protection, while supporting the development of sustainable and innovative capital markets, maintaining market integrity, and reducing systemic risk. This is in line with the organization’s previous publications on DeFi, stablecoins, and influencers.
“Through the outcomes of its work, IOSCO seeks to support the development of sustainable and innovative capital markets, while enhancing investor protection, maintaining market integrity, and reducing systemic risk.”
In 2022, the organization published reports on DeFi, stablecoins, and influencers. The reports recommend national regulators to acquire supervisory capacities that involve regulatory channels for reporting consumer complaints for misleading and illegal promotions, and evidence-tracking processes to cope with the fast pace and changing nature of online information.
For DeFi, IOSCO urged national regulators to have a granular and holistic understanding of the DeFi market, which could enhance their ability to create relevant legislation. Similarly, the report on stablecoins was delivered together with the Bank for International Settlements (BIS) and defined the stablecoin arrangement to provide an instrument that purported to be used as a means of payment and/or store of value.
IOSCO is an association of securities and futures regulators, with a board consisting of 35 regulators’ top executives, such as the heads of the U.S. Commodity Futures Trading Commission (CFTC), the U.S. Securities and Exchange Commission (SEC), and the United Kingdom Financial Conduct Authority (FCA).
Implications for Traders
IOSCO’s decision to work on a regulatory report is a step towards the recognition of the cryptocurrency market as a legitimate one that requires the same level of regulation as traditional capital markets. This development is positive, as traders will have a clear framework that they can operate under, while investors will be safeguarded against fraudulent activities.
The focus of the report on investor protection also means that traders and investors will have to update their strategies to conform to IOSCO’s recommendations. This could potentially drive out bad actors in the market and foster transparency.
IOSCO’s preparation of a crypto regulation report by 2023 is a positive step towards providing clear guidelines for the digital market. With a focus on investor protection, traders and investors will have to update their strategies and adhere to IOSCO’s recommendations to continue operating in the market.