On 28 May 2019 the International Organization for Securities Commission (IOSCO) published a consultation paper on Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms. Prepared by IOSCO’s Committee 2 on the Regulation of Secondary Markets, the consultation paper seeks stakeholder views in order to help IOSCO members evaluate the issues and risks relating to crypto-assets trading platforms (CTPs). The consultation paper identifies eight key considerations for regulatory authorities to take into account when considering the regulation of CTPs. These are accompanied by a set of toolkits, listing examples of practical regulatory measures. IOSCO states that the key consideration toolkits are “not intended to suggest or mandate any particular regulatory action or requirement”, but are designed to constitute issues that IOSCO members may consider in the context of their national efforts to regulate CTPs.
In the absence of internationally harmonised terminology, for the purpose of this consultation paper IOSCO defines “crypto-assets” as a “type of a private asset that depends primarily on cryptography and DLT or similar technology as part of its perceived or inherent value, and can represent an asset such as a currency, commodity or security, or be a derivative on a commodity”. It further defines CTPs as “a facility or system that brings together multiple buyers and sellers of crypto-assets for the purpose of completing transactions or trades”. It notes that while CTPs perform similar functions to securities trading venues, they can also perform functions typically attributed to intermediaries, custodians, transfer agents and CCPs.
The key considerations in respect of regulatory approach to CTPs identified by IOSCO are as follows:
- Access to CTPs, and on-boarding of participants
- Safeguarding participant assets, including custody arrangements
- Identification and management of conflicts of interest
- Description of CTP operations and transparency
- Market integrity, including the rules governing trading on the CTPs
- Price discovery mechanisms
- Technology, including resiliency and cyber security
- Clearing and settlement
The industry is invited to submit comments by 29 July 2019.