Crypto, TradFi Broadly Welcome IOSCO’s Proposed Norms for Digital Asset Markets

Industry stakeholders have largely welcomed new norms for the crypto sector proposed by the International Organization of Securities Commissions (IOSCO) on Wednesday – but are uncertain how the rules will look in effect.

The regulator's 18 policy recommendations for the global crypto industry cover a range of issues including market abuse, conflict of interest and consumer protection – and are designed to contribute to a larger effort by international bodies to supervise what regulators see as an unstable financial market.

Regulators around the world have so far taken diverging approaches to addressing the sector, ranging from outright bans in countries like China and legal crackdowns in the U.S., to setting up licensing regimes like the Markets in Crypto Assets (MiCA) regulation in the European Union.

For crypto stakeholders, universal standards for the sector are a welcome signal.

“The new blueprint from IOSCO is a shot in the arm for regulators worldwide to move towards a more harmonized system,” Antoni Trenchev, co-founder of crypto trading platform Nexo said in a statement.

Regulators around the world “should be able to examine” compliance of crypto transactions or holdings at any time, said Haydn Jones, global lead of blockchain and crypto solutions at financial advisor Kroll.

“Putting in place the frameworks to do so is a vital step in order to protect against criminal activity, but also to allow for everyone to benefit from the underlying technology that cryptocurrencies rely on,” Jones said in a statement.

The recommendations also push forward the creation of “a baseline for cross-border standards that can be built upon," said Chris Woolard, a regulations expert at professional services giant EY, in an emailed statement to CoinDesk.

In practice

Cross-jurisdictional crypto regulation is indeed overdue, but how effective it will be in practice remains to be seen, according to Woolard.

Those in traditional finance, who have seemingly taken a step back from entering crypto markets following the dramatic market collapse last year, may also need some convincing.

“Although the objective of these proposed recommendations is to safely integrate the crypto sector into mainstream finance, the exact consequences and execution are yet to be determined,” Rajeev Bamra, senior vice president at Moody’s Investors Service, said in a statement.

“Yet they hold the potential to shape the regulation and oversight of the crypto industry in significant ways,” Bamra added.

DeFi

Bamra also noted how IOSCO’s recommendations, spearheaded by the U.K. Financial Conduct Authority (FCA) as part of the global body’s fintech task force, did not address decentralized finance (DeFi), which is set to be separately looked at by the U.S. Securities and Exchange Commission.

While Bamra said DeFi norms, once released, “could help increase investor confidence, decrease exposure to risks, and encourage more consistent regulation" across jurisdictions, Chris Perkins, president and managing partner at investment firm CoinFund, commended IOSCO for not “commingling” DeFi in its policy paper covering crypto asset service providers.

“There is always going to be a tension in the crypto market between the nature of crypto – a decentralized technology, sitting above the traditional jurisdictional borders, taking risks, pushing technological boundaries – and a desire from governments to implement regulations to protect consumers,” said Will Charlesworth, crypto assets partner at U.K.-based Keystone Law.

IOSCO will accept public feedback on its proposed recommendations until July 31.

Read more: International Securities Regulator IOSCO Proposes Policy Recommendations for Crypto

Correction (May 25, 14:48 UTC): Modifies description of EY.