The International Organization of Securities Commissions (IOSCO) finalized recommendations for uniform regulation of the decentralized finance (DeFi) sector across different jurisdictions.
The IOSCO published nine policy recommendations for DeFi sector regulation. The initiative aims to encourage more harmonized regulation of the ecosystem across jurisdictions.
The document details all aspects of regulatory activity within the decentralized finance ecosystem. According to the IOSCO recommendations, national regulators should:
- scrutinize the products, services, and activities of DeFi companies in their jurisdiction and apply their existing or new regulatory penalties or regulatory actions;
- seek a global and comprehensive understanding of DeFi sector products, services, and activities;
- assess their technological knowledge, data, and tools necessary to understand and analyze the DeFi sector;
- identify persons responsible for the activities of organizations in the DeFi ecosystem;
- oversee and control the risks posed by DeFi sector activities, in particular to protect investors and the integrity of the traditional financial market;
- perform constant monitoring of the financial statements of companies offering DeFi products or services;
- assess their regulatory framework and make adjustments as necessary to prevent fraud and any unfair practices within the DeFi ecosystem;
- identify, manage, and mitigate conflicts of interest in the market;
- require responsible parties to accurately and fully disclose information about DeFi products and services;
- hold accountable anyone involved in fraud or market manipulation;
- develop opportunities for cooperation and information sharing with regulators and relevant authorities in other jurisdictions regarding DeFi products;
- seek to understand the relationship between the DeFi ecosystem, the cryptocurrency market, and TradFi and to regularly monitor and assess this relationship and its impact on the integrity of the financial ecosystem.
The IOSCO recommendations on the decentralized finance ecosystem were an addition to the list of global regulatory guidelines for crypto and digital assets published in November this year. The regulator even released a special Umbrella Note detailing the scheme of simultaneous application and interaction of both sets of recommendations. The note’s main idea is that regulators shouldn’t assume that it’s impossible to find those responsible for the activities of decentralized projects.
The IOSCO analysts believe that within the regulatory framework, no distinction should be made between cryptocurrencies and traditional finance.
