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IOSCO publishes Key Consideration for Regulating Crypto-Asset Trading Platforms

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Jayashree Ingle Follow

INDIA

Feb, 25 2020

Feb, 25 2020

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The International Organization of Securities Commission (IOSCO) which is the global watchdog, has asked the global regulators to be stern to crypto exchanges.

The board of the International Organization of Securities Commission recently published a report addressing the issues and risks associated with crypto-asset trading platforms. The report includes key considerations guiding the regulatory authorities over these issues.

The growing significance of crypto assets has fueled the interests of regulatory authorities across the globe. And thus the relevant issues and problems and their solutions have been on the priority list of the ongoing IOSCO work program 2020.

IOSCO Report Details   

IOSCO has cautioned the regulators to evaluate the crypto exchanges about how they assess their investors and instructed them that how this gauging will help them to combat the money laundering activities.

Apart from implementing strict KYC policies, IOSCO has even suggested that the regulators should frame strict policies towards the crypto-asset trading platforms (CTPs) about their intermediary role in trading on behalf of their customers. It also had suggested the regulators scrutinize the ‘sufficient risk disclosure’ issues being fulfilled with CTP customers or not.

IOSCO report discloses various titled issues such as risk involved in trading platforms and problems regarding the regulatory considerations of crypto-asset exchanges. The report identifies and evaluates the issues and suggests relevant feasible solutions to the regulatory authorities within the limits of their regulatory framework.

The key considerations mentioned in the report are as below:

  • Safekeeping of participant assets including customer arrangements
  • Access to CTPs
  • Identification and management of conflicts of interest
  • Transparency of operations
  • Price Discovery mechanism
  • Market integrity including the rules governing trading on the CTP and how those rules are monitored and enforced.
  • Technology including resiliency and cybersecurity

 

IOSCO states that most of the issues related to the regulation of CTPs are similar to the traditional security trading platforms but might have been hyped by the business practices used by the CTPs. The judiciaries where the crypto assets are being categorized as securities by the regulatory bodies, that territory should follow the basic guidelines of the security regulations. The report of the IOSCO suggests simple principles and procedures useful for regulatory authorities acknowledging the relevant risks and issues.

The considerations emerged amid the concerns over the ways crypto assets are being kept in custody and stored by the CTPs which often make them vulnerable to cyber-attacks and ultimately lead to investors’ funds' loss. The IOSCO has urged the regulators to either enforce capital control measures or ensure that compensation policies such as insurances.

Though the report has been published recently, it has been delivered in the G20 meeting in Osaka back in June 2019. The G20 then had issued a final communique praising the ongoing efforts by the Financial Stability Board (FSB) and other monetary regulatory bodies and ask them to instruct on additional multilateral rejoinders as needed.

IOSCO issued this consultation report based on a survey of the regulatory approaches of the CTPs that member jurisdictions are currently applying or considering. The final report is based on the consultation and conclusions drawn from them and includes a synopsis of the survey´s observations.


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Jayashree Ingle

CBW - External Analyst

INDIA

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