IOSCO chair says targeting ‘conglomerate’ platforms

The crash of FTX exchange has given greater urgency into regulation of the sector and targeting such 'conglomerate' platforms will be the focus of the new chair of global securities watchdog IOSCO in an interview.

Regulatory platforms could draw on principles from other sectors that deal with conflicts of interest, such as credit rating agencies and compilers of market benchmarks, without having to start from scratch, according to Jean-Paul Servais.

Regulators have resisted jumping in to write new rules, despite the fact thatcryptocurrencies have been around for a long time.

An estimated one million creditors faced billions of dollars in losses as a result of the collapse of FTX, will help change that, Servais told Reuters.

The sense of urgency was not the same as it was two or three years ago. There are some dissenting opinions about whether or not cryptocurrencies are a real issue at the international level because some people think it is still not a material issue and risk, Servais said.

It's important that we are able to start a discussion and that's where things are changing due to the interconnectivity between different types of businesses. The IOSCO, which coordinates rules for G 20 countries and others, has set out principles for regulating stable coins, but now the focus is on platforms that trade in them.

There is a separation between the activities like broking, trading, banking services and issuance, with each having its own set of conduct rules and safeguards.

Is it the case for the criptocurrency market? I would say most of the time not, Servais said.

FTX, a conglomerates, have emerged, performing multiple roles, such as brokerage services, custody, proprietary trading, issuance of token, all under a single roof that give rise to conflicts of interest, Servais said.

There is a need to provide more clarity to these markets due to the guidance in applying IOSCO's principles to the assets, according to Servais.

He said that they intend to publish a consultation on these matters in the first half of 2023.

Madrid-based IOSCO, or International Organization of Securities Commissions, is an umbrella body for market watchdogs like the Securities and Exchange Commission in the United States, Bafin in Germany, Japan's Financial Services Agency, and the UK Financial Conduct Authority, which all commit to applying the body's recommendations.

The EU's new markets in the MiCA framework is an interesting starting point for global guidance, as it focuses on supervision of operators of cryptocurrencies, said Servais, who also chairs Belgium's financial regulator FSMA.

I think the world is changing. There is a space for developing new standards on supervision of this kind of criptocurrency conglomerates. There is an obvious necessity, according to Servais.