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IOSCO Ask Regulators to bar firms from Crypto Functions


Today May 23, 2023, the IOSCO (International Organization of Securities Commission) made an important announcement.

In the announcement, IOSCO outlined policy suggestions for international cryptocurrency recommendations as a part of the public consultation procedure.

Who are the IOSCO?

The International Organization of Securities Commission (IOSCO) is a worldwide policy forum comprising regulators that jointly oversee 95% of the global securities market throughout 130 regions.

The IOSCO counseled the regulators to prevent crypto firms “from merging specific functions in a single legal entity or class of affiliated entities.”

For instance, it moves to prohibit crypto firms from operating exchanges, trading companies, and custody businesses under the same legal entity.

Last year, IOSCO established an FTF (Fintech Task Force) to develop cryptocurrency policy recommendations.

The 18 latest recommendations cover 6 areas, including the clash of interest from the vertical integration of businesses and events, regulatory cooperation, cross-border risks, and category for insider trading, market manipulation, and fraud.

According to Ernst and Young EMEIA lead, “regulations for crypto transactions throughout the jurisdictions is long overdue.”

He said, “A worldwide foundation of guardrails is a positive move forward.

However, it is also an ambitious venture, and it remains to be seen how successful it can be in practice.

A provision is made here for members of the public to assess the entire report from now till July 31 and also send in feedback and comments through email.

READ ALSO: After A Bungled Upgrade, Dash Blockchain Collapses

What Led to IOSCO Recommendations?

The recommendations of the IOSCO concerning clashes of interest and vertical came after the defunct crypto exchange FTX collapsed.

FTX was one of the largest exchanges in the industry and, at its level, was 3rd largest cryptocurrency exchange following Binance and Coinbase.

FTX crashed after Changpeng Zhao, Binance CEO, announced that his exchange would close down its stake in FTT during a bank run.

FTT is FTX’s native token, and CZ’s action was to respond to spreading rumors that Sam Bankman-Fried, FTX CEO and former friend of the regulators, was “soliciting to go against other industry actors behind their back.”

Due to the bank run, a shortage in liquidity was exposed. It revealed that FTX had combined the client’s funds and transferred them to Alameda Research, its sister company.

Unfortunately for FTX, the deal was exposed as Alameda Research experienced impairment due to a few trades gone wrong.

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