The International Organization of Securities
Commissions (IOSCO), a global body for securities regulators, has put forward
18 recommendations to regulate the global crypto industry. The recommendations
cover six key areas such as market manipulation, insider trading and fraud
as well as conflict of interest arising from ‘vertical integration’ of various
activities and functions by crypto firms.
Other key areas covered include cross-border
risks and regulatory cooperation, custody and client asset protection,
operational and technological risk, and retail access, suitability and
distribution. The global regulatory body plans to finalize the recommendations by early fourth quarter
2023.
IOSCO announces global crypto regulation recommendations.
📍 Link to the Consultation Report 🔗 https://t.co/Je0UQulWFs
📍 Link to Press Release 🔗 https://t.co/gf9qXuYdwE
📍 Link to the Crypto-Asset Roadmap 2022/2023 🔗 https://t.co/Rcth0NkMmt#CryptoAssets#Regulationpic.twitter.com/aqXPmUmQJN— IOSCO Press (@IOSCOPress) May 23, 2023
According to IOSCO, many crypto firms adopt a
‘vertically integrated’ business model where they engage in multiple activities
such as exchange trading, brokerage, market-marking, custody and settlements
under ‘one roof.’ The global watchdog believes that this creates conflicts of
interests for the firms.
It is, therefore, proposing that crypto asset service providers (CASPs) should have
“effective governance and organizational requirements in place to effectively
address” these conflicts. The commission also believes that measures such as obtaining separate
registrations and adopting legal disaggregation could solve the issue.
Furthermore, IOSCO believes that
a conflict of interests arises in situations where a CASP may front-run
clients’ orders in favour of their own transactions or those of a related party. Front running is a type of market manipulation in which a trader or broker takes advantage of non-public information about a large upcoming trade to make a profit. In this type of scenario, the trader or broker typically buys or sells the security before the public announcement of the trade in order to profit from the expected price movement.
To address this, IOSCO is calling on crypto firms to put in place “systems, policies
and procedures that provide for fair, orderly, timely execution and in the best
interest of clients.”
On market manipulation, IOSCO explained that
the crypto industry’s market integrity risks have been worsened by the “fragmented,
cross-border nature” of crypto markets. The risks include manipulative market
practices such as Ponzi schemes and wash trading as well as insider dealing and
fraudulent, misleading or insufficient disclosure.
To address this, IOSCO is calling
for “effective systems and controls to identify and monitor for manipulative
market practices and to prevent leakage of insider information.”
IOSCO Launches Public Consultation
IOSCO explained the recommendations were developed by the IOSCO Board’s Fintech
Task Force (FTF) in alignment with the organization’s Crypto-Asset Roadmap published in June 2022. Jean-Paul Servais,
Chairperson of IOSCO, further noted that the recommendations “is the outcome of an
intense period of regulatory risk analysis, information sharing and capacity
building.”
“Crypto-asset service providers need to
address unacceptable conflicts of interest and take far more seriously the
right of clients to have their monies and assets carefully minded and accounted
for,” added Lim Tuang Lee, Chairperson of the IOSCO Board-Level Fintech Task
Force.
In a statement released on Tuesday, IOSCO also disclosed that it has opened a public consultation and issued a consultation
report on the
recommendations and expects to receive comments until July 31, 2023. After
consultation, the body also expects that its 130 members across the globe “will
review their current regulatory frameworks to ensure that they comply with the
standards and fix any gaps promptly.”
Hidden Road taps Crossover Markets; Equiti in Uganda; read today’s nuggets.
The International Organization of Securities
Commissions (IOSCO), a global body for securities regulators, has put forward
18 recommendations to regulate the global crypto industry. The recommendations
cover six key areas such as market manipulation, insider trading and fraud
as well as conflict of interest arising from ‘vertical integration’ of various
activities and functions by crypto firms.
Other key areas covered include cross-border
risks and regulatory cooperation, custody and client asset protection,
operational and technological risk, and retail access, suitability and
distribution. The global regulatory body plans to finalize the recommendations by early fourth quarter
2023.
IOSCO announces global crypto regulation recommendations.
📍 Link to the Consultation Report 🔗 https://t.co/Je0UQulWFs
📍 Link to Press Release 🔗 https://t.co/gf9qXuYdwE
📍 Link to the Crypto-Asset Roadmap 2022/2023 🔗 https://t.co/Rcth0NkMmt#CryptoAssets#Regulationpic.twitter.com/aqXPmUmQJN— IOSCO Press (@IOSCOPress) May 23, 2023
According to IOSCO, many crypto firms adopt a
‘vertically integrated’ business model where they engage in multiple activities
such as exchange trading, brokerage, market-marking, custody and settlements
under ‘one roof.’ The global watchdog believes that this creates conflicts of
interests for the firms.
It is, therefore, proposing that crypto asset service providers (CASPs) should have
“effective governance and organizational requirements in place to effectively
address” these conflicts. The commission also believes that measures such as obtaining separate
registrations and adopting legal disaggregation could solve the issue.
Furthermore, IOSCO believes that
a conflict of interests arises in situations where a CASP may front-run
clients’ orders in favour of their own transactions or those of a related party. Front running is a type of market manipulation in which a trader or broker takes advantage of non-public information about a large upcoming trade to make a profit. In this type of scenario, the trader or broker typically buys or sells the security before the public announcement of the trade in order to profit from the expected price movement.
To address this, IOSCO is calling on crypto firms to put in place “systems, policies
and procedures that provide for fair, orderly, timely execution and in the best
interest of clients.”
On market manipulation, IOSCO explained that
the crypto industry’s market integrity risks have been worsened by the “fragmented,
cross-border nature” of crypto markets. The risks include manipulative market
practices such as Ponzi schemes and wash trading as well as insider dealing and
fraudulent, misleading or insufficient disclosure.
To address this, IOSCO is calling
for “effective systems and controls to identify and monitor for manipulative
market practices and to prevent leakage of insider information.”
IOSCO Launches Public Consultation
IOSCO explained the recommendations were developed by the IOSCO Board’s Fintech
Task Force (FTF) in alignment with the organization’s Crypto-Asset Roadmap published in June 2022. Jean-Paul Servais,
Chairperson of IOSCO, further noted that the recommendations “is the outcome of an
intense period of regulatory risk analysis, information sharing and capacity
building.”
“Crypto-asset service providers need to
address unacceptable conflicts of interest and take far more seriously the
right of clients to have their monies and assets carefully minded and accounted
for,” added Lim Tuang Lee, Chairperson of the IOSCO Board-Level Fintech Task
Force.
In a statement released on Tuesday, IOSCO also disclosed that it has opened a public consultation and issued a consultation
report on the
recommendations and expects to receive comments until July 31, 2023. After
consultation, the body also expects that its 130 members across the globe “will
review their current regulatory frameworks to ensure that they comply with the
standards and fix any gaps promptly.”
Hidden Road taps Crossover Markets; Equiti in Uganda; read today’s nuggets.