LONDON, Nov 24 (Reuters) – The crash of the FTX exchange has made regulation of the crypto sector more urgent and targeting these “conglomerate” platforms will be a focus for 2023, the new Chairman of IOSCO on Global Securities in an interview.
Jean-Paul Servais said regulation of crypto platforms could draw inspiration from the principles of other sectors that manage conflicts of interest, such as credit rating agencies and market benchmark compilers, without having to start afresh. from zero.
Crypto-assets like bitcoin have been around for years, but regulators have resisted writing new rules.
But the implosion of FTX, which left around a million creditors facing losses totaling billions of dollars, will help change that, Servais told Reuters.
“The sense of urgency wasn’t the same even two or three years ago. There are dissenting opinions about whether crypto is a real issue internationally because some people think it’s not still not a material problem and risk,” Servais said.
“Things are changing and because of the interconnectivity between different types of businesses, I think it’s important now that we can start a discussion and that’s where we’re going.”
IOSCO, which coordinates the rules for G20 countries and others, has already laid out principles for regulating stablecoins, but the focus is now on the platforms that market them.
In traditional finance, there is a functional separation between activities such as brokerage, trading, banking and issuing, each with its own set of rules of conduct and safeguards.
“Is that the case for the crypto market? I would say mostly no,” Servais said.
Crypto “conglomerates” like FTX have emerged playing multiple roles such as brokerage services, custody, proprietary trading, token issuance, all under one roof, giving rise to disputes interests, Servais said.
“For investor protection reasons, there is a need to further clarify these crypto markets markets through targeted guidance on the application of IOSCO principles to crypto assets,” Servais said.
“We intend to publish a report of consultations on these issues in the first half of 2023,” he added.
IOSCO, or International Organization of Securities Commissions, based in Madrid, is an umbrella organization for market surveillance bodies such as the Securities and Exchange Commission in the United States, Bafin in Germany, the Financial Services Agency of Japan and the Financial Conduct Authority of the United Kingdom, which all undertake to apply the recommendations of the organization.
The European Union’s new markets in crypto-assets or MiCA framework is an “interesting starting point” to develop global guidance as it focuses on oversight of crypto operators, said Servais, who also chairs the Belgian financial regulator FSMA.
“I think the world is changing. We know there is room to develop new standards on supervising these kinds of crypto conglomerates. There is a clear need,” Servais said.
Reporting by Huw Jones Editing by Bernadette Baum
Our standards: The Thomson Reuters Trust Principles.