Global regulators target crypto platforms after FTX crash
The collapse of the FTX exchange has increased the urgency for regulating the cryptocurrency industry, and the new chair of the international securities watchdog IOSCO stated in an interview that the focus for 2023 will be on such “conglomerate” platforms.
According to Jean-Paul Servais, regulating crypto platforms might borrow ideas from other industries that deal with conflicts of interest, such credit rating companies and those that create market benchmarks, rather than needing to start from scratch.
Although cryptocurrencies like bitcoin have been around for a while, officials have held off on creating new regulations.
However, Servais told Reuters that the collapse at FTX, which left an estimated one million creditors with losses totalling billions of dollars, will help change that.
“The sense of urgency was not the same even two or three years ago. There are some dissenting opinions about whether crypto is a real issue at the international level because some people think that it’s still not a material issue and risk,” Servais said.
“Things are changing and due to the interconnectivity between different types of businesses, I think it’s now important that we are able to start a discussion and that’s where we are going.”
Although the fundamentals for regulating stablecoins have already been defined by IOSCO, which coordinates regulations for the G20 and other nations, attention is now shifting to the platforms that trade in them.
In conventional finance, different operations such as broking, trading, banking services, and issuance are functionally distinct from one another and each has its own set of standards of behaviour.
“Is it the case for the crypto market? I would say most of the time not,” Servais said.
“Crypto ‘conglomerates’ like FTX have emerged, performing perform multiple roles such as brokerage services, custody, proprietary trading, issuance of tokens all under a single roof that give rise to conflicts of interest”, Servais said.
“For investor protection reasons, there is a need to provide additional clarity to these crypto markets markets through targeted guidance in applying IOSCO’s principles to crypto assets,” Servais said.
“We intend to publish consultations report on these matters in the first half of 2023,” he added.
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 are just a few examples of market regulators that are members of the Madrid-based IOSCO, or International Organization of Securities Commissions, and have agreed to implement its recommendations.
Global regulators target crypto platforms after FTX crash
According to Servais, who also serves as the chair of Belgium’s financial regulator FSMA, the European Union’s new markets in crypto assets, or MiCA framework, is an “interesting starting point” for creating international guidance because it places a strong emphasis on the supervision of crypto operators.
“I think that the world is changing. We know there is some space for developing new standards about supervision of this kind of crypto conglomerates. There is an obvious necessity,” Servais said.
