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Global securities watchdogs’ association IOSCO to focus on tokenization, AI

The global securities watchdogs association has updated its work plan for 2024 to focus on tokenization and artificial intelligence (AI).

The International Organization of Securities Commissions (IOSCO) published its revised work plan on April 12 to include emerging aspects of global finance. According to IOSCO Chairman Jean-Paul Servais, the changes reflect the key issues facing investors and financial markets globally.

Established in 1983, IOSCO brings together the world’s securities watchdogs and is globally recognized as the industry’s standards setter.

Artificial intelligence and financial asset tokenization are at the top of the association’s priority list.

In its initial work plan, issued in March, IOSCO pledged to focus on tokenization use cases specific to the securities market. This includes digital representation of existing financial instruments like equities and derivatives. It also focused on the issuance of capital market products directly through DLT in the form of native tokens.

“The objective of this work is to develop a shared understanding among IOSCO members on the adoption and current use-cases of asset tokenisation in the securities markets,” the association stated.

Based on its findings this year, it will develop further policy recommendations, most likely in the last quarter of 2025.

IOSCO’s focus on setting standards in tokenization comes at a time when it has become the leading application for DLT in the mainstream. From banks like HSBC (NASDAQ: HSBC) to asset managers like BlackRock, every major global financial entity is investing heavily in tokenization.

Beyond tokenization, IOSCO also intends to continue its work in digital currency regulation. Last September, the association published nine policy recommendations for DeFi. The proposals were based on the “same activity, same risk, same regulatory outcome” approach and sought to harmonize the fragmented approaches in global DeFi oversight to prevent regulatory arbitrage.

Five months earlier, in May 2023, IOSCO had published policy recommendations for digital currency oversight.

In the updated work plan, the association has pledged to monitor the implementation of its two sets of recommendations.

Commenting on the new items on its work plan, IOSCO chair Servais stated, “Our proactivity to adapt our agenda to these issues is evident in this revised Workplan and is supported by our members, who rely on our risk-based approach to enhance investor protection, ensure fair and efficient markets and promote financial stability.”

Other areas that IOSCO plans to focus on include green products and the single-name credit default swap market.

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