Crypto-asset Regulation Attracts the Attention of Global Securities Regulators

By Jim Bulling, Edwin Tan and Andrew Fay

On 28 May 2019, the International Organization of Securities Commissions (IOSCO) published Consultation Paper CR02/2019 (Paper), which identifies the risks and regulatory considerations associated with the trading of crypto-assets on crypto-asset trading platforms (CTPs). The Paper seeks input from industry participants amid a growing demand for an international approach to the regulation of crypto-assets, recently illustrated by the G20’s joint request for global regulators to monitor risks and consider multilateral responses in relation to crypt-assets as needed.

The Paper sets out some of the key issues that regulators should consider in relation to monitoring CTPs, however, it does not prescribe specific regulatory actions that domestic regulators should take. The key considerations identified by the Paper include safeguarding investors’ assets, dealing with access to crypto-asset trading platforms, ensuring market integrity and identifying and managing conflicts of interest.

The Paper also highlights the need for appropriate cooperation and communication between regulators to ensure investors are protected, particularly where the operations of CTPs span multiple jurisdictions.  Many regulatory authorities already have bilateral memorandums of understanding in place with other regulatory authorities that facilitate information sharing.

In preparing the Paper, IOSCO undertook a survey of a number of domestic regulatory bodies to determine how regulators are currently dealing with the emerging industry, with the majority of respondents reporting that they are applying their existing regulatory framework to CTPs. Notably, IOSCO states that where a domestic regulator determines that a crypto-asset falls within its remit, the basic principles and objectives of securities regulation should apply. Following the release of the Paper, the Australian Securities and Investments Commission updated Information Sheet 225, which provides guidance on how Australia’s legislation might apply to CTPs operating in Australia.