The International Organization of Securities Commissions (IOSCO), one of the world’s leading financial securities supervisory bodies, is working to help lawmakers regulate cryptocurrencies more effectively.
IOSCO published a series of regulatory recommendations related to cryptocurrencies on May 23 as part of a consultation report produced by the IOSCO Council Fintech Working Group.
The report includes 18 policy recommendations to help global securities regulators address market integrity and investor protection issues stemming from cryptocurrencies. Following the consultation period until the end of July, IOSCO plans to finalize the recommendations by the end of 2023.
In Chapter 1, IOSCO sets out a general recommendation addressed to all regulators, advising policy makers not to create disparities in the regulation of cryptocurrency and traditional finance.
Cryptocurrency regulators around the world should try to achieve regulatory results that are “same as or consistent with those required in traditional financial markets,” the IOSCO suggested. According to the authority, These recommendations should help facilitate “a level playing field between crypto assets and traditional financial markets” and reduce the risk of regulatory arbitrage. The IOSCO wrote:
“One of the objectives of the IOSCO is to promote greater consistency with respect to how IOSCO members approach the regulation and supervision of crypto-asset activities, given the cross-border nature of the markets, the risks of regulatory arbitrage, and the significant risk of damage to which retail investors continue to be exposed”.
IOSCO also encouraged global regulators to review the applicability and adequacy of their cryptocurrency regulatory frameworks and to what extent they behave as substitutes for regulated financial instruments. Regulators should apply this approach to all types of crypto assets, including stablecoins like Tether (USDT), the authority noted.
Created in 1983, the IOSCO is an association of organizations that regulate the global securities and futures markets. The IOSCO Council is the governing and policy-making body of its members. It is made up of 35 securities regulators from around the world, including the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission.
According to the US SEC, IOSCO members regulate more than 95% of the world’s securities markets. “The SEC is an active member of the IOSCO Board,” the US securities regulator wrote, adding that one of the main functions of the IOSCO Board is to examine major securities regulation issues and develop appropriate policy responses.
Although IOSCO called for regulators to create a regulatory balance between traditional finance and the cryptocurrency sector, some of its members have been criticized for not providing enough clarity on the regulation of cryptocurrencies.
In April, Pro-crypto congressman Tom Emmer has criticized SEC Chairman Gary Gensler for his approach to regulating cryptocurrencies, calling him a “bad faith regulator.” Previously, Emmer also pointed to “apparent inconsistencies” in SEC cryptocurrency regulation that caused the authority to overlook massive cryptocurrency industry crashes like Terra, Celsius, Voyager, and FTX.
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