IOSCO unveils first draft of global regulations for digital assets

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The International Organization of Securities Commissions (IOSCO) indicated a strong intent to push for global regulations for the digital currency industry following the catastrophic collapse of FTX in late 2022.

In its latest move, IOSCO has published 18 proposed measures designed to insulate capital markets from implosions in the digital currency industries. Matthew Long, a director with the U.K.’s Financial Conduct Authority (FCA), noted that the new standards are vital in the wake of the increasing correlation between digital assets and stocks.

“Recent global events have shown us why we need this to work,” said Long. “This is about making sure crypto is safe for the market.”

Over the last year, a handful of jurisdictions have opted to classify digital assets as securities rather than commodities, leaving securities watchdogs to grapple with the task of policing the industry. In the absence of uniform global rules, the IOSCO remarks that bad actors may leverage the borderless nature of the asset class for regulatory arbitrage.

The draft proposal prioritizes conflict of interest resolution and cross-border regulatory cooperation among IOSCO’s 130 global members. Other areas of focus for IOSCO are standardizing the custody of digital assets, treatment of retail customers, reduction of operational risks, and cracking down on incidents of market manipulation.

Jean-Paul Servais, head of IOSCO, stated that the suggestions are a watershed moment in mitigating “the clear and proximate risks to investor protection and market integrity risk.” Servais added that the contagion effect of the FTX collapse on global capital markets fuelled the drive for a unified international standard among securities regulators.

The official document is expected to be circulated before the end of 2023, with 130 member organizations expected to utilize the proposals to “plug gaps in their rule books.” The umbrella body of global regulators is also expected to publish rules about the regulation of decentralized finance (DeFi).

Seeking a global regulatory standard

Similar to the push by the IOSCO, several institutions are making brave efforts to establish a common regulatory standard across several jurisdictions. India, for instance, is keen on using its G20 presidency to push for uniform global regulations.

The European Union is set to finalize its encompassing digital asset rules before the end of the month, stoking pressure on the U.S. and the U.K. to float their own regulations. Central bank digital currencies (CBDCs) are not being spared, with the G7 nations and the International Monetary Fund (IMF) pledging to influence uniformity in their developments.

Watch: Blockchain regulation with Marcin Zarakowski