Members of the public can view the full report here and have until July 31 to send in comments and feedback by email.ย
The IOSCO inย particularย advised regulatoryย authorities to prohibit cryptocurrency corporations โfrom combining certain functions in a single legal entity or group of affiliated entities,โ such as prohibiting cryptocurrency corporations from likewise running exchanges, trading corporations, and custody enterprises under the same legal entity.ย
ย ย The IOSCO is a worldwide policy forum made up of regulatoryย authorities that collectively oversee 95 percent of the worldโs securities market across 130 jurisdictions. Last year, the organization established a Fintech Task Force (FTF) to develop its cryptocurrency policy recommendations.ย
The eighteen new recommendations cover 6 areas, including conflicts of interest stemming from the vertical integration of activities and functions, cross-border dangers and regulatory participation, likewise as a category for market manipulation, insider trading, and fraud.
โRegulation of cryptocurrency activities across jurisdictions is overdue,โ Ernst and Young EMEIA lead shared with Decrypt. โA worldwide baseline of guardrails is a positive step forward, but it is likewise an ambitious undertaking and it remains to be seen just how effective it can be in practice.โ
FTXย Tradingย Ltd collapse informs policy-making
The IOSCOโs recommendations around conflicts of interest and vertical come in the wake of one of the industryโs largest collapses in the now-bankrupt cryptocurrency exchange FTX.ย
At its height, FTXย Tradingย Ltd was the third largest cryptocurrency exchange behind Binanceย Cryptoย exchange and Coinbase.ย
ย ย It collapsed withinย a bank run after Binance CEO Changpeng Zhao announced his exchange would liquidate its position in FTTโFTXโs native tokenโin response to speculation that FTXย Tradingย Ltd CEO and onetime regulatorsโ friend Sam Bankman-Fried was lobbying โagainst other industry players behind their backs.โ
The bank run exposed a shortfall in liquidity becauseย ofย the fact that FTXย Tradingย Ltd had commingled customer funds and sent them to its sister company Alamedaย Research after the latter had impairment on severalย bad trades.
