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Crypto Rules Coming Thick & Fast; Global Watchdog Announces Strategy

Using lessons learned from the FTX exchange's collapse last year, which sparked worries over consumer protection, the International Organisation for Securities Commissions (IOSCO) revealed on Tuesday the first worldwide strategy for regulating crypto assets and digital markets.

Photo by Traxer / Unsplash / Blockhead

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Rules and regulations for the crypto industry are coming at a breakneck speed after the European Union announced a set of its own last week.

Well, that is being welcomed by the crypto industry which has appeared positive that at least a dialogue on digital assets was doing the rounds globally.

IOSCO's worldwide strategy for regulating crypto assets and digital markets comes a week after the global watchdog announced that the group would soon submit the first set of international standards for crypto assets.

Also, last week, member states of the European Union approved the world's first complete set of laws to regulate cryptos on Tuesday, putting pressure on other nations like the United Kingdom and the United States to follow suit.

Asia is also racing ahead on crypto rules.

Crypto firms have been advocating for a worldwide approach to regulation because different countries have different standards, and it is usually only required to comply with anti-money laundering inspections.

These steps were taken after, in November of last year, crypto exchange FTX filed for bankruptcy in the United States due to liquidity difficulty.

Regulators worldwide stepped in to prevent potential conflicts of interest by imposing new laws on FTX-style crypto "conglomerates" that house several businesses under one roof with inadequate protections for consumer money.

What IOSCO Has to Say

According to Jean-Paul Servais, chairman of the IOSCO, the initiatives announced on Tuesday mark a watershed moment in the fight against hazards posed by crypto assets like bitcoin and ether.

"The time has come to an end the regulatory uncertainty characterising crypto activities. Today's consultation paper received unanimous support from the IOSCO Board and is the outcome of an intense period of regulatory risk analysis, information sharing and capacity building," said Servais

"As such, it will mark a turning point in addressing the very clear and proximate risks to investor protection and market integrity risks. With 130 members worldwide regulating more than 95% of the world's securities markets, IOSCO is best positioned to deliver an effective and globally consistent set of policy recommendations," added IOSCO's chair.

Conflicts of interest, market manipulation, international collaboration among regulators, safekeeping of digital assets, operational concerns, and the handling of retail clients are all addressed in the proposed guidelines.

The steps announced will use well-established protections from traditional markets to eradicate conflicts among crypto transaction parties.

The watchdog intends to finish guidelines by the end of the year and anticipates its 130 members worldwide will use them to fill gaps in national rulebooks, doing away with fragmented regulation and the opportunity for corporations to play off regulators against one other.

IOSCO, which includes the SEC, the FSA of Japan, the FCA of the UK, and the BaFin of Germany, is seeking public input on the proposed legislation.

The move comes as the European Union finalised the world's first set of comprehensive guidelines this month, increasing the onus on the United Kingdom, the United States, and other countries to establish their standards.

Regulation proposals for decentralised financial systems are expected from IOSCO later this summer.

The policy suggestions were developed under the leadership of LIM Tuang Lee, Chair of the IOSCO Board-Level Fintech Task Force.

"The Recommendations in IOSCO's Consultation Report set expectations and guardrails to regulate and supervise crypto-asset markets, which are inherently cross-border in nature. Crypto-asset service providers need to address unacceptable conflicts of interest and take far more seriously the right of clients to have their monies and assets carefully minded and accounted for," said Lee.

"It is time for regulators to work together across borders and various jurisdictions to ensure that investor protection and market integrity are upheld in crypto-asset markets."

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