How the worldwide securities regulator of the markets will implement the regulations is still uncertain, industry observers say.
Industry stakeholders have largely welcomed new norms for the cryptocurrency sector proposed by the International Organization of Securities Commissions (IOSCO) on Wednesday – but are uncertain how the regulations will look in effect.
The regulator’s 18 policy recommendations for the worldwide cryptocurrency industry cover a range of issues including market abuse, conflict of interest and consumer safety – and are designed to contribute to a larger effort by international bodies to supervise what regulatory authorities see as an unstable financial market.
Regulatory authorities around the globe have so far taken diverging approaches to addressing the sector, ranging from outright bans in countries like China and legal crackdowns in the United States, to setting up licensing regimes like the Markets in Cryptocurrency Assets (MiCA) regulation in the European Union.
For cryptocurrency stakeholders, universal standards for the sector are a welcome signal.
“The new blueprint from IOSCO is a shot in the arm for regulatory authorities worldwide to move towards a more harmonized system,” Antoni Trenchev, co- founder of cryptocurrency trading platform Nexo stated in a statement.
Regulatory authorities around the globe “should be able to examine” compliance of cryptocurrency transactions or holdings at any time, stated Haydn Jones, worldwide lead of blockchain tech and cryptocurrency solutions at financial advisor Kroll.
“Putting in place the frameworks to do so is a critical step to be able to guard against criminal activity, but likewise to allow for everyone to take advantage of the underlying technology that digital currencies rely on,” Jones stated in a statement.
The recommendations likewise push forward the creation of “a baseline for cross-border standards that can be built upon,” stated Chris Woolard, a regulations expert at blockchain tech platform EY, in an emailed statement to CoinDesk.
Cross-jurisdictional cryptocurrency regulation is already overdue, but how effective it will be in practice remains to be seen, reports by Woolard.
Those in traditional finance, who have seemingly taken a step back from entering cryptocurrency markets following the dramatic market collapse a year ago, may likewise need some convincing.
“ Despite the fact that the objective of these proposed recommendations is to safely integrate the cryptocurrency sector into mainstream finance, the exact consequences and execution are is still to be determined,” Rajeev Bamra, senior vice president at Moody’s Investors Service, stated in a statement.
“ Still they hold the capacity to shape the regulation and oversight of the cryptocurrency industry in whole lot of ways,” Bamra added.
Bamra likewise noted how IOSCO’s recommendations, spearheaded by the United Kingdom Financial Conduct Authority (FCA) as part of the worldwide body’s fintech task force, did not address decentralized finance (DeFi), which is set to be separately looked at by the United States Securities and Exchange Commission.
Although while Bamra stated Decentralized Finance norms, once released, “could help increase investor confidence, decrease exposure to dangers, and promote more consistent regulation” across jurisdictions, Chris Perkins, president and managing partner at financing company CoinFund, commended IOSCO for not “commingling” Decentralized Finance in its policy paper covering cryptocurrency investment service providers.
“ There is always going to be a tension in the cryptocurrency market betwixt the nature of cryptocurrency – a decentralized technology, sitting over the traditional jurisdictional borders, taking dangers, pushing technological boundaries – and a desire from governments to implement regulations to guard consumers,” stated Will Charlesworth, cryptocurrency assets partner at U.K.-based Keystone Law.
IOSCO will accept public feedback on its proposed recommendations until July 31.