Global regulators to target crypto platforms after FTX crash

The collapse of the FTX exchange has increased the urgency for regulating the cryptocurrency industry, and the new chair of the international securities watchdog IOSCO stated in an interview that the focus for 2023 will be on such "conglomerate" platforms.

According to Jean-Paul Servais, regulating crypto platforms might borrow ideas from other industries that deal with conflicts of interest, such credit rating companies and those that create market benchmarks, rather than needing to start from scratch.

Although cryptocurrencies like bitcoin have been around for a while, officials have held off on creating new regulations.

However, Servais told Reuters that the collapse at FTX, which left an estimated one million creditors with losses totaling billions of dollars, will help change that.

Even two or three years ago, there wasn't the same sense of urgency. Some individuals believe that cryptocurrency is still not a significant problem or issue at the global level, thus there are some differing views on the subject, Servais added.

"Things are changing, and because different types of businesses are becoming more interconnected, I think it's now crucial that we are able to start a discussion, and that's where we are going," the speaker said.

Although the fundamentals for regulating stablecoins have already been established by IOSCO, which coordinates regulations for the G20 and other nations, attention is now shifting to the platforms that trade in them.

In conventional finance, different operations such as broking, trading, banking services, and issuance are functionally distinct from one another and each has its own set of standards of behavior.

"Is this true for the cryptocurrency market? Most of the time, I'd say no," Servais remarked.

With several functions including brokerage services, custody, proprietary trading, and the issue of tokens all performed under one roof by crypto "conglomerates" like FTX, conflicts of interest can arise, according to Servais.

"There is a need to offer extra clarity to these crypto markets markets by focused guidance in applying IOSCO's rules to crypto assets," Servais added. This is necessary for investor protection.

He continued, "We want to produce a report on consultations on these issues in the first half of 2023."

Madrid-

based The Securities and Exchange Commission in the United States, Bafin in Germany, the Financial Services Agency of Japan, and the Financial Conduct Authority of the United Kingdom are just a few examples of market watchdogs under the umbrella of the International Organization of Securities Commissions (IOSCO), which agrees to implement its recommendations.

According to Servais, who also serves as the chair of Belgium's financial regulator FSMA, the European Union's new markets in cryptoassets, or MiCA framework, is a "interesting starting point" for creating international guidance because it places a strong emphasis on supervision of crypto operators.

"I believe the world is transforming. We are aware that there is room to create new guidelines for the oversight of these types of crypto conglomerates. There is a clear need, according to Servais.