IOSCO finalises policy recommendations for decentralised finance

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The International Organization of Securities Commissions (IOSCO), the global standard setter for securities market regulators, has released its final report containing policy recommendations for decentralized finance (DeFi). The nine policy recommendations are designed to address concerns related to market integrity and investor protection in the DeFi space, promoting consistency in regulatory frameworks and oversight among member jurisdictions.

The recommendations cover six key areas: understanding DeFi arrangements and structures, achieving common standards of regulatory outcomes, identification and management of key risks, clear and comprehensive disclosures, enforcement of applicable laws, and cross-border cooperation. They complement the recommendations for crypto and digital assets (CDA) markets issued in November 2023.

The IOSCO recommendations align with the Crypto-asset Roadmap 2022/2023 and emphasize the interoperability between the DeFi and CDA recommendations, detailed in the published Umbrella Note.

Having delivered these recommendations, IOSCO now shifts its focus to monitoring implementation, capacity building, and providing technical assistance to its members. Acknowledging that jurisdictions are at different stages in addressing risks in crypto-asset markets and DeFi, IOSCO emphasizes the need for consistent implementation across its membership.

Jean-Paul Servais, Chairman of IOSCO, highlighted the organization’s commitment to addressing the real risks of crypto-asset markets in a coordinated manner. He expressed satisfaction with IOSCO’s ability to deliver on the policy ambitions outlined in the Crypto-asset Roadmap within less than 18 months.

Tuang Lee Lim, Chairman of the IOSCO Board-level Fintech Task Force, emphasized that the policy recommendations on CDA and DeFi provide a robust framework to tackle core risks in crypto-asset markets. The goal is to create a fair and transparent playing field that encourages responsible innovation while ensuring investor protection and market integrity outcomes.