Global Watchdog Unveils Regulatory System For Crypto Sector

International securities watchdog IOSCO unveiled recommendations on Tuesday for a standard global structure to regulate crypto-assets and digital markets.

The sector, which generally only needs to comply with anti-money laundering checks, has been urging regulators to establish a global system because different jurisdictions have had their own rules.

The move by IOSCO follows the collapse of the FTX exchange late last year, which intensified concern that consumers need to be protected.

It comes after the crypto exchange began US bankruptcy proceedings last November after a liquidity crisis that prompted intervention from regulators worldwide.

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Plan to remedy conflicts of interest, other risks

Tuesday’s recommendations are a “turning point in addressing the very clear and proximate risks to investor protection and market integrity risks,” said Jean-Paul Servais, who chairs the International Organization of Securities Commissions (IOSCO).

The proposed standards cover dealing with conflicts of interest, market manipulation, cross-border regulatory cooperation, custody of crypto-assets, operational risks, and treatment of retail customers.

The 18 measures planned apply long-established safeguards from mainstream markets to eliminate conflicts of interest between the different parts of a crypto transaction.

The watchdog said it aimed to finalise the standards by the end of the year, and expected its 130 members worldwide to use them to plug gaps in their rulebooks promptly.

Regulatory umbrella group

IOSCO, an umbrella group of regulators such as the US Securities and Exchange Commission, Japan’s Financial Services Agency, Britain’s Financial Conduct Authority and Germany’s BaFin, is canvassing public opinion on the regulations.

The step follows the European Union’s finalisation this month of the world’s first set of comprehensive rules, piling pressure on Britain, the United States and other countries to come up with their own norms.