The International Organization of Securities Commissions (IOSCO) has released a report on policy recommendations aimed at establishing compliant markets for trading digital assets. These recommendations, called the Crypto and Digital Assets Recommendations (CDA Recommendations), prioritize investor protection and market integrity, two essential aspects of securities regulation. The recommendations cover six key areas, which include market manipulation, cross-border risks, and regulatory cooperation, among others. While the IOSCO recognizes definitional and interpretive jurisdictional differences in the rapidly evolving crypto market, it has developed an approach to mitigate risks functional to the market. The IOSCO suggests that all regulators apply or adapt the guiding principles consistently for all members. According to the report, regulatory frameworks, whether existing or new, should aim to achieve regulatory outcomes for investor protection and market integrity that are the same as traditional financial markets. This approach aims to facilitate a level-playing field between crypto-assets and traditional financial markets and reduce the risk of regulatory arbitrage.
In contrast to the IOSCO recommendation, the UK Parliament’s Treasury committee has recently suggested that cryptocurrency trading should be regulated as a form of gambling rather than a financial service. This suggestion came after an inquiry into the cryptocurrency industry found that current regulations were inadequate and that investors weren’t sufficiently protected. Nevertheless, the IOSCO’s recommendations provide a framework for compliant markets, a welcome development for the industry, which has struggled with regulatory uncertainty and a lack of clear guidelines. However, individual jurisdictions must adopt these recommendations to have an impact, and it remains to be seen how they will respond. Lastly, the IOSCO’s recommendations are not binding, and while they offer guidance in regulatory practices and investor protection, they remain non-enforceable.