The collapse of the FTX exchange has increased the immediacy of regulating the crypto sector, and the new chair of global securities watchdog IOSCO stated in an interview that designed to target such “conglomerate” platforms will be the priority for 2023.

According to Jean-Paul Servais, regulating crypto platforms could draw on principles from other sectors that deal with conflicts of interest, such as credit rating agencies and market benchmark compilers, without having to start from scratch.

Cryptoassets such as bitcoin have been around for years, but regulators have been hesitant to write new rules.

However, the implosion of FTX, which left an estimated one million creditors facing billions of dollars in losses, will help change that, according to Servais.

“The sense of urgency was not the same even two or three years ago. There are some dissenting opinions about whether crypto is a real issue at the international level because some people think that it’s still not a material issue and risk,” Servais said.

“Things are changing and due to the interconnectivity between different types of businesses, I think it’s now important that we are able to start a discussion and that’s where we are going.”

The International Organization for Standardization (IOSCO), which coordinates rules for G20 countries and others, has already established principles for regulating stablecoins, but the focus is now shifting to platforms that trade in them.

In mainstream finance, activities such as broking, trading, banking services, and issuance are functionally separated, with each having its own set of conduct rules and safeguards.

“Is it the case for the crypto market? I would say most of the time not,” Servais said.

Crypto’conglomerates’ like FTX have emerged, performing multiple roles such as brokerage services, custody, proprietary trading, and token issuance all under a single roof, creating conflicts of interest, according to Servais.

“For investor protection reasons, there is a need to provide additional clarity to these crypto markets markets through targeted guidance in applying IOSCO’s principles to crypto assets,” Servais said.

“We intend to publish consultations report on these matters in the first half of 2023,” he added.

The Madrid-based IOSCO, or International Organization of Securities Commissions, is a governing body for market regulators such as the Securities and Exchange Commission in the United States, Bafin in Germany, Japan’s Financial Services Agency, and the UK Financial Conduct Authority, all of which have agreed to implement the body’s recommendations.

According to Servais, who also chairs Belgium’s financial regulator FSMA, the European Union’s new markets in cryptoassets framework, or MiCA framework, is a “interesting starting point” for developing global guidance because it focuses on crypto operator supervision.

“I think that the world is changing. We know there is some space for developing new standards about supervision of this kind of crypto conglomerates. There is an obvious necessity,” Servais said.

(Adapted from Reuters.com)

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