After opening a public consultation earlier this year to establish a global approach to addressing DeFi risks, IOSCO – the international umbrella policy forum for securities regulators worldwide – has released its Final Report with Policy Recommendations for Decentralized Finance (DeFi) .
The nine Policy Recommendations aim to address market integrity and investor protection concerns arising from DeFi by supporting greater consistency of regulatory frameworks and oversight across member jurisdictions. The recommendations cover six key areas: (1) Understanding DeFi arrangements and structures, (2) Achieving common standards of regulatory outcomes, (3) Identifying and managing key risks (4) Clear, accurate and comprehensive disclosures (5) Enforcing applicable Laws , and (6) Cross-Border Cooperation.
The DeFi Policy Recommendations are complementary to the Crypto and Digital Asset Markets (CDA) Policy Recommendations issued in November 2023. The two sets of IOSCO Recommendations have been developed in line with IOSCO’s Crypto-Asset Roadmap 2022/2023 and interoperability between the two sets of Proposals are detailed in the Umbrella Note published alongside the DeFi Final Report.
With the delivery of these recommendations, IOSCO now turns its attention to monitoring the implementation, capacity building and technical assistance needs of its members. IOSCO said it recognizes that jurisdictions are at different stages of addressing the risks presented by cryptocurrency markets and decentralized finance. Some have existing regimes, while others need to develop new, tailor-made frameworks.
Jean-Paul Servais, President of IOSCO said:
“I am pleased that IOSCO has delivered on the policy ambitions outlined in our Crypto-Asset Roadmap in less than eighteen months. The risks of cryptocurrency markets are real and we are addressing them in a coordinated manner, seeking consistent implementation of these IOSCO Recommendations across our members to better protect investors worldwide.”
Tuang Lee Lim, Chair of IOSCO’s Board-level Fintech Working Group, established to develop the policy measures, said:
“The two sets of policy recommendations for CDA and DeFi provide a coherent and robust policy framework to address the key risks posed by cryptocurrency markets. This will help facilitate a fair and transparent playing field where responsible innovation can occur, while ensuring investor protection and market integrity results.”
IOSCO is the leading international policy forum for securities regulators and is recognized as the global standard setter for securities regulation. The organization’s members regulate more than 95% of the world’s securities markets in approximately 130 jurisdictions and continue to expand.
The complete IOSCO Final Report with Policy Recommendations on Decentralized Finance (DeFi) can be found here (pdf).