The International Organization of Securities Commissions (IOSCO) released a report on December 19, 2023, addressing decentralized finance (DeFi).
This main report proposes nine guidelines for regulators to enhance market integrity and protect investors in the blockchain and distributed ledger technology-driven DeFi sector
IOSCO’s guidance aims to align DeFi operations with the established standards of financial regulation. The first recommendation urges regulators to thoroughly analyze DeFi products, services, and activities within their jurisdiction.
Identifying entities or individuals who might fall under regulatory view is important, as highlighted in the second recommendation.
The third recommendation emphasizes aligning DeFi regulation with existing IOSCO standards to mitigate risks.
This includes addressing conflicts of interest and managing operational and technological risks, as stated in the fourth and fifth recommendations. The sixth point stresses the importance of clear information disclosure to users and investors by those responsible.
Furthermore, the seventh recommendation advocates for regulators to possess comprehensive enforcement powers to address legal violations within DeFi services.
The eighth recommendation encourages collaboration and information sharing among global regulators and authorities, highlighting the borderless nature of DeFi.
Finally, the ninth point underscores the importance of understanding the interconnectivity between DeFi products and the wider crypto-asset and traditional financial markets.
The IOSCO report, reflecting input from 45 stakeholders across eight categories, indicates extensive industry engagement.
This effort signifies a major move in incorporating DeFi into the global financial regulatory framework, aiming to balance innovation with market integrity and investor protection.
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