Crypto will have to follow stricter rules, says a watchdog. The failure of the FTX platform shows that there needs to be more oversight.
The crash of the FTX exchange has made it more important to regulate the cryptocurrency industry, says the new head of IOSCO, a global group that keeps an eye on securities.
Jean-Paul Servais told Reuters that 2023 will be all about going after these “conglomerate” platforms.
In an interview with the news agency, he said that regulations for crypto platforms could be based on how credit rating agencies and people who make market benchmarks handle conflicts of interest. This way, they wouldn’t have to start from scratch.
Servais said that the collapse of the FTX exchange could help change the fact that regulators have been slow to write new rules for crypto assets like Bitcoin. “Even two or three years ago, there wasn’t the same sense of urgency.” Some people don’t agree that crypto is a real problem at the international level because they think it’s still not a big enough problem or risk.
The CEO also said, “Things are changing, and because different kinds of businesses are connected, I think it’s important that we start a conversation.” So that’s what we’re going to do.
The International Organization of Securities Commissions (IOSCO), which is based in Madrid, coordinates rules for the G20 and other countries. The body, which has already set out rules for regulating stablecoins, will now reportedly focus on platforms that trade in them.
Servais says that crypto “conglomerates” like FTX have sprung up. These firms do a variety of things under one roof, such as provide brokerage services, custody, proprietary trading, and token issuance, which can lead to conflicts of interest.
“In order to protect investors, these crypto markets need more clarity through targeted guidance on how to apply IOSCO’s principles to crypto assets,” Servais said. In addition, he stated that the IOSCO intends to issue a consultation report on these issues in the first half of 2023.
Due to lax tax laws, FTX is based in the Bahamas. On November 11, the company went down in a scandal that cost crypto investors more than $11 billion. There were reports that customer funds were mishandled, and a rival exchange, Binance, dropped plans to buy it.
The scandal has made people lose faith in the cryptocurrency market, which has caused the value of assets like Bitcoin to drop.