Regulation of cryptocurrency platforms can draw inspiration from the principles of other sectors that manage conflicts of interest, such as credit rating agencies and market standards aggregators, Jean-Paul Servier said, without having to start from scratch.
Cryptocurrencies like bitcoin have been around for years, but regulators have resisted the urge to rush into writing new rules.
But Service told Reuters that FTX’s internal implosion, which left an estimated one million creditors facing billions of dollars in losses, would help change that.
“The sense of urgency wasn’t the same as two or three years ago,” Servis said. “There are different opinions on whether cryptocurrency is a real problem internationally because some people think it’s not yet a problem and too serious.”
“Things are changing and because of the interdependence of 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 rules for G20 countries and others, has already laid out principles for regulating stablecoins, but the focus now is on the platforms that trade them.
In traditional finance, there is a functional separation between activities such as brokerage, trading, banking and issuance, each with its own set of rules of conduct and safeguards.
“Is this the case for the cryptocurrency market? I would say for the most part, no,” Servier said.
Cryptocurrency “conglomerates” such as FTX have emerged, Service said, performing multiple roles such as brokerage, custody, proprietary trading and token issuance all under one roof, which has led to conflicts and interests.
“For investor protection reasons, it is necessary to provide greater clarity to these cryptocurrency markets through targeted guidance in applying the IOSCO Principles to crypto assets,” Servais said.
“We intend to publish an advisory report on these issues in the first half of 2023,” he added.
IOSCO, or the International Organization of Securities Commissions, headquartered in Madrid, is the umbrella organization for market watchdogs such as the Securities and Exchange Commission in the United States, Bafin in Germany, the Financial Conduct Authority in Japan, and the Financial Conduct Authority in the United Kingdom, all of which undertake to enforce WHO recommendations.
The EU’s new Framework on Crypto Asset Markets, or MiCA, is an “interesting starting point” for the development of global guidelines, as it focuses on the supervision of cryptocurrency operators, said Ms Servais, who also heads Belgian financial regulator FSMA.
“I think the world is changing,” Mr. Service said. “We know there is some room to develop new standards for overseeing these types of cryptocurrency blocs. There is a clear need.”