The International Organization of Securities Commissions (IOSCO) has published its final set of policy recommendations for regulating the decentralized finance (DeFi) sector.
Given growing concerns about regulatory arbitrage and investor harm, regulators and policymakers are seeking to bring the cryptoasset sector within the traditional regulatory perimeter.
In its paper, IOSCO said its recommendations “aim to address market integrity and investor protection concerns arising from DeFi by supporting greater consistency of regulatory frameworks and oversight.”
The principles-based proposals set out in IOSCO’s recommendations seek to apply its well-established standards for securities regulation to the emerging DeFi space on the basis of “same activity, same risk, same regulation” — the basic approach that global policymakers have sought to follow in developing regulation for the crypto sector.
DeFi includes products, services and activities that use distributed ledger technology, including self-executing smart contracts. The sector aims to enable direct investing activity — bypassing the role of traditional financial intermediaries and centralized institutions.
Last month, the umbrella group of global regulators also issued final policy recommendations for cryptoassets and crypto markets. The proposals for the DeFi segment round out its policy approach to the emerging crypto sector, and are intended to work alongside the cryptoasset recommendations.
IOSCO indicated it is shifting its focus toward implementation, capacity building and providing technical assistance to regulators adopting the recommendations.
“The risks of cryptoasset markets are real and we are tackling these in a coordinated manner, seeking consistent implementation of these IOSCO recommendations across our membership to best protect investors globally,” said Jean-Paul Servais, IOSCO chair, in a release.