Watchdog proposes first set of global rules for crypto sector

By Huw Jones

LONDON (Reuters) -International securities watchdog IOSCO unveiled on Tuesday the first global approach to regulating cryptoasset and digital markets, drawing on lessons from last year’s collapse of the FTX exchange that fuelled concerns over consumer protection.

The industry, which typically only has to comply with anti-money laundering checks, has been calling for a global approach to regulation as different jurisdictions follow their own rules.

The moves come after crypto exchange FTX began U.S. bankruptcy proceedings last November following a liquidity crisis that prompted intervention from regulators worldwide.

Tuesday’s recommendations are a “turning point in addressing the very clear and proximate risks to investor protection and market integrity risks,” said Jean-Paul Servais, who chairs the International Organization of Securities Commissions (IOSCO).

The proposed standards cover dealing with conflicts of interest, market manipulation, cross-border regulatory cooperation, custody of cryptoassets, operational risks, and treatment of retail customers.

The 18 measures planned apply long-established safeguards from mainstream markets to eliminate conflicts of interest between the different parts of a crypto transaction.

The watchdog said it aimed to finalise the standards by the end of the year, and expected its 130 members worldwide to use them to plug gaps in their rulebooks promptly.

IOSCO, an umbrella group of regulators such as the U.S. Securities and Exchange Commission, Japan’s Financial Services Agency, Britain’s Financial Conduct Authority and Germany’s BaFin, is canvassing public opinion on the regulations.

The step follows the European Union’s finalisation this month of the world’s first set of comprehensive rules, piling pressure on Britain, the United States and other countries to come up with their own norms.