A global financial watchdog has laid out the world's first set of of global standards for regulating cryptocurrencies.

While there have been calls for crypto regulation over the past several years, advocates for greater consumer protection saw their case strengthened following the collapse of the FTX exchange in November 2022 caused by a liquidity crisis.

On Tuesday, the International Organization of Securities Commissions (IOSCO) issued for consultation detailed recommendations to lawmakers across the globe as to how to regulate crypto assets. The body is an umbrella group of regulators which includes the US. Securities and Exchange Commission, Japan's Financial Services Agency, Britain's Financial Conduct Authority and Germany's BaFin.

These cover six key areas: Conflicts of interest arising from vertical integration of activities and functions; Market manipulation, insider trading and fraud; cross-border risks and regulatory cooperation; Custody and client asset protection; Operational and technological risk; and Retail access, suitability, and distribution.

Currently, the crypto industry typically only has to deal with anti-money laundering checks, with different jurisdictions following their own rules.

The watchdog said that it aims to finalise the standards by the end of the year, and that it expects its 130 members to use them to complement their own rules in an effort to eliminate fragmented regulation and the ability for businesses in the industry to play regulators off against one another.

Commenting on the launch, Jean-Paul Servais, chairperson of IOSCO, said: “As the G7 Finance Ministers and Central Bank communiqué of 13 May has once again reminded us, the time has come to put an end to the regulatory uncertainty that characterises crypto activities.

“Today’s consultation paper received unanimous support from the IOSCO Board and is the outcome of an intense period of regulatory risk analysis, information sharing and capacity building. As such, it will mark a turning point in addressing the very clear and proximate risks to investor protection and market integrity risks.”

LIM Tuang Lee, chairperson of the IOSCO Board-Level Fintech Task Force, set up to develop the policy recommendations, added that the recommendations “set expectations and guardrails to regulate and supervise crypto-asset markets, which are inherently cross-border in nature,” and that “crypto-asset service providers need to address unacceptable conflicts of interest and take far more seriously the right of clients to have their monies and assets carefully minded and accounted for.”

The news comes a week after the European Union revealed the world’s first set of comprehensive rules for crypto. These rules, expected to be rolled out in 2024, will require firms that want to issue, trade and safeguard crypto assets, tokenised assets and stablecoins within the bloc to obtain a licence.

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