After issuing a consultation back in May for detailed recommendations regarding how to regulate crypto and digital assets in a more coordinated manner around the globe, the International Organization of Securities Commissions Organisation (IOSCO) – whose membership regulates more than 95% of the world’s securities markets in more than 130 jurisdictions – has now released its Final Report with Policy Recommendations for Crypto and Digital Asset (CDA) Markets.

The IOSCO said that these recommendations are central to the delivery of a coordinated global regulatory response to the significant investor protection and market integrity risks posed by centralized cryptoasset intermediaries called crypto asset service providers (CASPs).

IOSCO’s detailed and targeted recommendations elaborate the regulatory expectations, either through application of existing rules or development of new rules, depending on the jurisdiction, to address the key areas of harm observed in these markets.

The CDA Recommendations set a clear and robust international regulatory baseline to ensure that CASPs meet the standards of business conduct that apply in traditional financial markets.

The Recommendations cover six key areas, consistent with the IOSCO Objectives and Principles for Securities Regulation and relevant supporting IOSCO standards, recommendations, and good practices:

1. Conflicts of interest arising from vertical integration of activities and functions,
2. Market manipulation, insider trading and fraud,
3. Custody and client asset protection,
4. Cross-border risks and regulatory cooperation,
5. Operational and technological risk, and
6. Retail distribution.

Jean-Paul Servais, IOSCO Chair said:

As IOSCO chair, I am pleased with the publication of the IOSCO Report on Crypto and Digital Asset Markets which is the first and important step to ensure investors are protected and cryptoasset markets operate fairly, efficiently and transparently. This report is a key component of the international framework for these markets envisaged by the G20 and FSB. Next, our attention turns to ensuring the adoption and implementation of the recommendations to support optimal consistency in the way crypto-asset markets and activities are regulated across IOSCO member jurisdictions.

Tuang Lee Lim, Chair of the IOSCO Board-Level Fintech Task Force, set up to develop the policy measures, said:

The activities of CASPs and their associated risks frequently mirror those observed in traditional financial markets. The regulatory approach taken is therefore consistent with IOSCO’s Principles and associated standards for securities markets regulation. These 18 recommendations for crypto and digital asset markets are outcomes-focused and based on the principle of “same activity, same risk, same regulatory outcome”.

The IOSCO separately consulted on proposed policy recommendations for DeFi (short for “decentralized finance”) back in September, which it said will be finalized by the end of 2023. At that time, the IOSCO will also publish an umbrella note explaining in more detail the interoperability between the two sets of recommendations.

The IOSCO’s Policy Recommendations for Crypto and Digital Asset Markets can be seen here (pdf).