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Stepping into a breach that finds the United States without a
comprehensive cryptocurrency framework while the EU is about to
implement its own cryptocurrency framework this July (called
Markets in Crypto Assets or MiCA, reported on in Cabinet News and Views in
October 2022), the International Organization of Securities
Commissions (IOSCO) proffered a Consultation Report on “Policy
Recommendations for Crypto and Digital Assets Markets” on May
23.
The draft report, which IOSCO will finalize in Q4 2023, includes
18 policy recommendations that “cover the range of activities
in crypto-asset markets that involve [crypto-asset service
providers or CASPs] from offering, admission to trading, ongoing
trading, settlement, market surveillance and custody as well as
marketing and distribution (covering advised and non-advised sales)
to retail investors” and does not address decentralized
finance or “DeFi” activities or markets.
While there are 18 policy recommendations, one recommendation is
overarching – specifically, the recommendation that regulatory
frameworks should facilitate a level playing field in terms of
investor protection and market integrity, with those required in
“traditional financial markets,” with the goal of
avoiding regulatory arbitrage. Inspired by the FTX collapse,
several of the policy recommendations are focused on CASPs like FTX
that house traditional exchange functions alongside functioning as
a trading intermediary and encouraging the adoption of rules that
would separate functions, institute clear conflicts of interest
protocols and requiring them to “disclose substantive and
procedural listing and delisting standards pertaining to
crypto-assets.” Additional recommendations include requiring
CASPs to meet safety and soundness standards, especially whenever
they are engaged in the custodying of crypto-assets, and to
“diligently assess and onboard retail investors who are aware
of, and deemed suitable to take on, the greater speculative risks
inherent in this market, and use appropriate measures when
promoting crypto-assets.”
IOSCO will welcome feedback on the Consultation Report from all
stakeholders on or prior to July 31, 2023.
The content of this article is intended to provide a general
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