The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has responded to the International Organisation of Securities Commissions’ (IOSCO) Consultation Report on Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms.
The consultation report highlights the current issues and risks that have been identified with the trading of crypto-assets on trading platforms (CTPs) such as transparency of operations, price discovery mechanisms, clearing and settlement, safekeeping of participants’ assets, identification and management of conflicts of interests. It also identifies the fragmented approach across regulatory jurisdictions in the regulation of CTPs, due to differences between the emerging sets of rules that are being proposed and implemented by individual national authorities. The WFE supports IOSCO’s proposals to highlight the key considerations that national regulators should consider, and to provide toolkits that they could use when regulating CTPs.
In its response, the WFE recommends the establishment of a co-ordinated, widely understood and applied approach to the regulation of CTPs, under the guidance of IOSCO’s Objectives and Principles of Securities Regulation (IOSCO Principles) and hopes that international standard setters will continue to work together to produce a unified, global approach to the regulation of CTPs. This approach will likely benefit national regulators, consumers and the industry alike, as much needed certainty and clarity is introduced to the marketplace.
The WFE response also champions the importance of technological innovation, which underpins CTPs and can benefit competition-based growth and a healthy market. The WFE advises that this innovation should operate in a balanced, fair and regulated manner, with appropriate alignment to that applied to established market infrastructure, in order to avoid detrimental impacts on financial markets and investor interests. Further, the use of appropriate and internationally co-ordinated regulation of CTPs will avoid unintentionally impeding early stage technology, and will ensure the longer-term trust and protection of consumers.
Nandini Sukumar, Chief Executive Officer, WFE said: “The WFE welcomes IOSCO’s timely and well-developed consultation. Resilient, well-functioning markets balance sound regulation, clear investor protection mechanisms and common standards, in addition to fostering innovation. All of these factors are important if crypto-asset trading is to grow, to engender trust, to be able to protect investors, and to ensure the stability of the wider financial ecosystem. Regulated market infrastructures, who are developing crypto-asset trading within these standards will work to foster that ideal. At the WFE we are working with our members and stakeholders to develop those common standards.’’