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Could cryptocurrencies and digital assets be regulated globally?

New global regulations have been put forward to try and protect consumers and businesses from sustaining big losses.

By Claudia Glover

Global finance organisation the International Organization of Securities Commissions (IOSCO) has proposed a set of international regulations for crypto assets and digital tokens. Calls have been growing for a coordinated approach to regulation cryptocurrencies such as Bitcoin, particularly in light of last year’s collapse of the FTX exchange amid allegations of fraud.

New international regulations have been proposed for crypto assets (Photo by Joe Raedle/Getty Images)

IOSCO, which is made up of securities regulators across the globe, has started a consultation that will be accessible to the public until the end of July.

How would global cryptocurrency regulation work?

The proposals will attempt to support greater consistency across the cryptocurrency landscape and address concerns related to market integrity and investor protection arising from crypto asset activities. 

IOSCO sets out 18 recommendations across six categories, covering areas including market manipulation and the treatment of retail customers, as well as disclosure rules and governance.

It wants to “encourage optimal consistency in the way crypto asset markets and security markets are regulated within individual IOSCO jurisdictions, in accordance with the principle of ‘same activities, same risks, same regulatory outcomes’.”

Crypto businesses have been allowed to grow “on a flawed basis,” said Jean-Paul Servais, chair of IOSCO. This “has to be corrected,” he told reporters.

The new guidance follows a number of high profile collapses in the crypto space, such as so-called stablecoin Terra and FTX, which left 80,000 UK investors – and many others around the world – out of pocket when it went out of business.

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This prompted calls for intervention from regulators internationally, who said that rules were needed to stop conflicts of interest to prevent crypto businesses from 6conducting business without safe-guarding customer assets.

What are other regulators are proposing?

IOSCO is not the only body recommending that tighter regulations should be written around cryptocurrencies. Last month the European Parliament endorsed the first EU rules to trace crypto asset transfers and prevent money laundering, as well as common rules on supervision and customer protection.

The rules aim to ensure that crypto transfers can always be traced and suspicious transactions blocked, as is already the case with any other financial operation. 

“The so-called ‘travel rule’, already used in traditional finance, will in future cover transfers of crypto assets,” the European Parliament said. “Information on the source of the asset and its beneficiary will have to ‘travel’ with the transaction and be stored on both sides of the transfer.”

The law would also cover transactions above €1000 from so-called self-hosted wallets (a crypto-asset wallet address of a private user) when they interact with hosted wallets managed by crypto-assets service providers. 

The UK government launched a consultation into what it describes as “robust” rules to regulate some types of crypto assets in February. But its plan to do this in line with traditional financial services has been criticised by MPs on the Treasury committee, who said in a report last week that crypto assets should instead be regulated like “gambling” because they “lack intrinsic value” and pose a risk to UK consumers.

Read more: UK government scraps Royal Mint NFT plan

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