Global Regulators Target Crypto Platforms After FTX Crash By Reuters


© Reuters. FILE PHOTO: Representations of cryptocurrencies are seen in front of the FTX logo shown in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration

By Hugh Jones

LONDON (Reuters) – The new head of global securities watchdog IOSCO said in an interview that the collapse of the FTX exchange has created more urgency in regulating the cryptocurrency sector and that targeting such “conglomerate” platforms will be a focus for 2023.

Regulation of crypto platforms can build on principles from other sectors dealing with conflicts of interest, such as credit rating agencies and market standards aggregators, Jean-Paul Servier said, without having to start from scratch.

Cryptoassets like bitcoin have been around for years but regulators have resisted jumping in to write new rules.

But Service told Reuters the implosion at FTX, which left an estimated 1 million creditors facing billions of dollars in losses, would help change that.

“The sense of urgency wasn’t the same even two or three years ago,” said Servais. “There is some dissenting opinion about whether cryptocurrency is a real problem internationally because some people think it is still a fundamental problem and risk.”

“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 go.”

IOSCO, which coordinates rules for G20 countries and others, has already laid out principles for regulating stablecoins, but the focus is now shifting to the platforms on which they trade.

In mainstream 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? Most of the time I would say no,” Servier said.

Cryptocurrency ‘conglomerates’ such as FTX have emerged, Service said, performing multiple roles such as brokerage services, custody, proprietary trading and token issuance all under one roof creating a conflict of interest.

“For investor protection reasons, there is a need 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 the report of the consultations on these matters in the first half of 2023,” he added.

The Madrid-based IOSCO, or International Organization of Securities Commissions, is the umbrella body for market watchdogs such as the US Securities and Exchange Commission, Germany’s Bafin, Japan’s Financial Services Agency, and the UK’s Financial Conduct Authority, who are all obligated to implement the body’s recommendations.

Servais, who also heads the Belgian financial regulator FSMA, said the EU’s new Markets in Crypto Assets or MiCA framework is an “interesting starting point” for developing global guidelines as it focuses on supervising crypto operators.

“I think the world is changing. We know there is some room to develop new standards around the oversight of this type of cryptocurrency bloc. There is a clear imperative,” Servis said.



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