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The first worldwide strategy to regulating crypto asset and digital markets was published by the international securities watchdog IOSCO on Tuesday, building on the lessons learned from the collapse of the FTX exchange last year, which stoked worries about consumer safety.
As various jurisdictions have their own regulations, the sector, which normally simply needs to comply with anti-money laundering procedures, has been asking for a worldwide approach to regulation.
The actions follow the filing of a US bankruptcy petition by the cryptocurrency exchange FTX in November 2018 due to a liquidity shortage.
Regulators from all around the world intervened as a result, stating that laws were necessary to prevent conflicts of interest for crypto “conglomerates” like FTX that mix several businesses under one roof with insufficient safeguards for user funds.
The initiatives announced on Tuesday mark a turning point in addressing the dangers associated with cryptocurrencies like bitcoin and ether, according to Jean-Paul Servais, the head of the International Organisation of Securities Commissions (IOSCO).
“Crypto business has been allowed to grow on a flawed basis and it has to be corrected,” Servais said during a news conference.
Conflicts of interest, market manipulation, international regulatory cooperation, custody of cryptoassets, operational concerns, and handling of retail clients are all addressed in the proposed guidelines.
Recent international events have demonstrated the need for this activity. According to Matthew Long, director of digital assets at the Financial Conduct Authority in the United Kingdom, this is about ensuring that cryptocurrency is secure for the market.
Frameworks like those of IOSCO, according to Haydn Jones, global lead of blockchain and crypto solutions at Kroll, prevent illicit conduct while enabling everyone to gain from the technology behind cryptocurrencies.
The 18 procedures outlined utilise time-tested protections from existing markets to get rid of conflicts of interest between the various components of a crypto transaction.
The watchdog expects its 130 members globally to implement the guidelines once they are finalised by the end of the year to fill in any gaps in national rulebooks, eradicating fragmented regulation and preventing businesses from playing off regulators against one another.
IOSCO, a collective of regulators that includes the US Securities and Exchange Commission, the Financial Services Agency of Japan, the Financial Conduct Authority of the United Kingdom, and the BaFin of Germany, is polling the public on the regulations.
The action comes as the European Union this month finalised the first set of comprehensive standards in the world, increasing pressure on Britain, the United States, and other nations to develop their own guidelines.
IOSCO will publish guidelines for regulating decentralised finance later this summer.