Understanding the Defi Arrangement at the ‘Economic Reality’ Level
The International Organization of Securities Commissions (IOSCO) has advised regulators to gain a thorough understanding of decentralized finance (defi) arrangements at the economic reality or enterprise level. This involves identifying individuals who have control or influence over the enterprise as it helps regulators identify existing or potential regulatory touchpoints. IOSCO suggests regulators review publicly available information and engage relevant individuals such as academics or researchers. They can also use investigatory tools and techniques to gather additional information, including information sharing arrangements with other authorities.
Addressing Market Integrity and Investor Protection Concerns
IOSCO’s report recommends that regulators understand the activities and services offered by defi platforms and assess whether they constitute the provision of financial services. The report outlines steps for regulating entities controlled by decentralized autonomous organizations (DAOs). The aim of all nine policy recommendations in the report is to address market integrity and investor protection concerns arising from defi platform activities. IOSCO aims to promote consistency in the regulation and oversight of crypto asset markets.
Hot Take: IOSCO Urges Regulators to Identify Key Individuals for Defi Regulation
The International Organization of Securities Commissions (IOSCO) has advised regulators in the decentralized finance (defi) space to identify individuals who exercise control or sufficient influence at the enterprise level. This identification is crucial for regulators to pinpoint existing or potential regulatory touchpoints. By understanding the economic reality of defi arrangements and engaging relevant individuals, regulators can address market integrity and investor protection concerns in the defi market. IOSCO’s report provides policy recommendations to achieve greater consistency in the regulation and oversight of crypto asset markets. This step is vital in ensuring the same activity, same risk, same regulation approach to defi across jurisdictions.
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