IOSCO Reports on Crypto-Asset Trading Platforms
On February 12, the International Organization of Securities Commissions (IOSCO) published its final report on “Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms (CTPs)” (the Final Report). The Final Report follows a consultation paper IOSCO published in May 2019 (for more information, please see the June 14, 2019 edition of Corporate & Financial Weekly Digest).
In the Final Report, IOSCO defines a CTP as a “facility or system that brings together multiple buyers and sellers of crypto-assets for the purpose of completing transactions, or trades.”
Since IOSCO members are national securities regulators, the purpose of the Final Report is to provide these regulators with a toolkit to use when assessing and regulating CTPs. The Final Report is split into seven areas of focus, and, at the end of each area, IOSCO provides a list of questions to ask or elements to assess. The seven areas are:
Access to CTPs (focusing on access criteria and participant on-boarding)
Safeguarding Participants’ Assets (such as custody models and wallets for crypto-assets)
Conflicts of Interest (and the impact of conflicts on investor protection and market efficiency)
Operations of CTPs (specifically, whether operational information is available to the public)
Market Integrity (such as trade monitoring to detect and prevent fraud)
Price Discovery (including pre- and post-trade transparency); and
Technology (focusing on systems resilience).
In the Final Report, IOSCO identifies certain IOSCO Principles, which apply to CTPs,. For example, IOSCO Principle 33 states, “The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.” IOSCO also uses the report to highlight the importance of cross-border information sharing and of “efficient and reliable clearing and settlement.”
The Final Report is available here.