Iosco calls on global regulators to be faster and bolder on crypto markets

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Regulators must be faster and bolder in taming cryptocurrency markets and must break up companies with intractable conflicts of interest, the global security watchdog said as it unveiled a blueprint to rein in the “wild west” of finance.

Iosco, the umbrella group for global markets regulators, on Tuesday published guidelines for authorities tightening their standards in the wake of a series of industry explosions, notably crypto exchange FTX. The 18-point plan covers areas including conflicts of interest, disclosure rules and governance.

“The diversity that we have across jurisdictions at the moment is not that they are moving in different directions, but that they have not gone far enough in the direction that they all know they need to go in,” Iosco Secretary General Martin Moloney told the Financial Times.

“What we would say to jurisdictions is just to carry on. They all have different legal frameworks, different regulatory frameworks. Just push on, do it as fast as you can by this standard. . . It’s not helpful for anyone to hold back at this point.”

The failure of FTX and its close relationship with Alameda Research, an associated trade group, gave regulators new impetus to tighten or create standards. In the past, companies such as Binance, the world’s largest exchange, have clashed with global regulators over concerns about money laundering policies and consumer protections. The company has also faced criticism over the transparency of its corporate structure.

Last week, the EU finalized a comprehensive package of crypto regulations, while the UK is in the early stages of developing its own rules, which it promises will be “more nimble” than in Europe.

Jean-Paul Servais, chairman of Moloney and Iosco, who is also chairman of Belgium’s securities regulator, noted that many crypto companies offer services such as brokerage, trading, custody and market making. In traditional finance firms, such activities are separated from each other.

The proposals ask regulators to consider whether some conflicts of interest “are sufficiently acute that they cannot be effectively mitigated”. If so, they may “require more robust measures such as legal disaggregation and separate registration and regulation of certain activities”.

“It’s new,” says Moloney. “It is therefore quite a powerful challenge. . . on the part of Iosco to the global regulatory community to actually deal with this issue of business as built on the basis of conflicting interests.”

Iosco does not have powers to force regulators to adopt the rules, but Moloney said he was “confident” the proposals would be implemented by Iosco’s membership, which spans 130 countries and 95 percent of global financial markets. deck.

“We don’t usually, frankly, have a problem with members who persistently don’t comply with our recommendations,” Moloney said. “Continued non-compliance with our recommendations will not be sustainable for our members and I am confident that will not happen.”

“I’m not aware of any significant player in the crypto market, as far as you can find where they trade, that doesn’t trade from a member jurisdiction. So we have the global reach to make these recommendations work,” he added.

Servais said countries should move “as quickly as possible” and noted that on May 13 the G7 reiterated its support for the implementation of “effective regulatory and supervisory frameworks” for crypto-assets and stablecoins.

Moloney added that it would take a “number of years for even the major jurisdictions” to fully achieve the “quite demanding recommendations”, which also include proposals on fair dealing, disclosure and corporate governance.

“In the meantime, investors should continue to be very cautious about crypto-asset service providers who tell them they are regulated and therefore everything is fine,” Moloney says.

The Financial Stability Board, a body of global financial policymakers, publishes its recommendations for reducing the financial stability risks of crypto in July.