IOSCO

IOSCO Issues Crypto Trading Report for Regulators

IOSCO - CryptoThe Board of the International Organization of Securities Commissions (IOSCO) has published a report on crypto-asset trading platforms (CTPs) which sets out key considerations to assist regulatory authorities in addressing its risks.

Titled Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms, the report goes to identify issues all around, with key considerations relating to:

• Access to CTPs,
• Safekeeping of participant assets, including custody arrangements,
• Identification and management of conflicts of interest,
• Transparency of operations,
• Market integrity, including the rules governing trading on the CTP,
and how those rules are monitored and enforced,
• Price discovery mechanisms,
• Technology, including resiliency and cyber security.

The report is intended to assist regulatory authorities in evaluating CTPs within the context of their regulatory frameworks. The document finds that many of the issues are common to traditional securities trading venues but may be heightened by the business models used by CTPs: “Where a regulatory authority has determined that a crypto-asset is security and falls within its remit, the basic principles or objectives of securities regulation should apply. Accordingly, the report states that the IOSCO Principles and Methodology provide useful guidance for regulatory authorities considering the identified issues and risks”, the statement said.

“IOSCO will continue to monitor the evolution of the markets for crypto-assets to ensure the issues, risks and key considerations identified in this report remain relevant and appropriate. IOSCO delivered the consultation report to the G20 meeting in Osaka in June 2019. The G20 issued a final communique that welcomed the “on-going work by the Financial Stability Board (FSB) and other standard-setting bodies and asked them to advise on additional multilateral responses as needed”, it added.

The World Federation of Exchanges (WFE) has been more vocal about the cryptocurrency ecosystem. A recent statement of theirs was to commend the Monetary Authority of Singapore’s (MAS) Consultation Paper on Proposed Regulatory Approach for Derivatives Contracts on Payment Tokens (crypto assets).

As Singapore’s financial watchdog plans to recognize established
regulated market infrastructure as the appropriate market operators to
conduct, and instill, the high standards required for the trading of
crypto asset-based derivatives contracts, the WFE commends the
approach but recommends greater clarity on how third-country
recognition processes might function to enable third-country market
infrastructure to trade Payment Token Derivatives.

In October 2019, the WFE asked the Financial Conduct Authority, the
UK’s regulatory authority, not to ban the sale of crypto derivatives
to retail consumers while agreeing and supporting the regulator’s
desire to better protect vulnerable consumers.

The institution said that options to mitigate excessive risk exposure
for retail consumers should be pursued alongside the potential
introduction of ‘standards’ for such products, particularly as the
crypto market is evolving and maturing. Should it be implemented, the
ban should be reviewed as the market evolves. in order to ensure
consumer choice and access and to avoid international market
fragmentation, particularly if international standard setters
introduce a new global regulatory approach to the regulation of crypto
assets.