Thinking | 18 July 2022

IOSCO’s Fintech Task Force releases crypto roadmap for 2022-2023

By John Bassilios

The International Organisation of Securities Commissions recently established a board-level Fintech Task Force, comprising 27 board member jurisdictions. Its purpose is to develop, oversee, deliver and implement IOSCO’s regulatory agenda for fintech and crypto-assets. We report on what’s ahead for the sector.

Since being established (March 2022), the Fintech Task Force (FTF) has released its workplan for 2022-2023. In the first 12-24 months, it will prioritise policy-focused work on crypto-asset markets and activities while continuing to track trends and market developments related to fintech and innovation.

The FTF has formed two workstreams: the Crypto and Digital Assets stream (CDA) and the Decentralised Finance stream (DeFi). Generally, these workstreams aim to analyse and respond to market integrity and investor concerns in the crypto-asset space, particularly following recent market turmoil having resulted in significant losses due to inadequate protections. In this regard, the workstreams will consider systemic risk concerns and contribute to the Financial Stability Board’s agenda through continuous engagement with the board and other international standard setting bodies.

The CDA workstream

The CDA workstream is led by the UK Financial Conduct Authority, and will engage with the FTF and IOSCO more broadly in its work. The CDA will focus on market integrity and investor protection. In doing so, it will analyse issues of:

  • fair and orderly trading, transparent markets, suitability and market manipulation (Part 1); and
  • safekeeping, custody and soundness (Part 2).

In its work, the CDA workstream will consider the potential for regulation to support innovation. To do so, it will assess emerging risks unique to the crypto-asset market and different regulatory approaches across jurisdictions.

The CDA workstream intends to complete Part 1 in Q2-Q4 2022 and Part 2 in Q42022 - Q12023 and deliver a public report with proposed policy recommendations in 2023.

The DeFi workstream

The DeFi workstream is led by the United States Securities and Exchange Commission, and will also seek input from the FTF and IOSCO more broadly.

It will expand on previous work, namely the IOSCO DeFi report, expanding on the issues of market integrity, investor protection and financial stability risks of DeFi. This work will complement the CDA workstream's – as well as the FSB's – agenda. As DeFi structures are typically complex and opaque, the DeFi workstream's objective is to develop shared understanding among IOSCO members of the emerging trends in the DeFi space as well as to provide regulatory guidance on managing risk.

The workstream will also identify how the IOSCO principles can apply to transactions, products and services in the DeFi space (Part 1).

In developing its work, the DeFi working group may also consider potential areas in which regulation could play a role in supporting innovation. The DeFi working group will continue to explore and highlight the links between DeFi, stablecoins, and crypto-asset trading, lending and borrowing platforms, as well as the interactions of DeFi with broader financial markets (Part 2). The working group will aim to deliver a public report in 2023 (Part 3).

What does this mean?

Australia's membership of IOSCO suggests a willingness to consider policies proposed by the FTF. Once published, the FTF's reports on crypto-assets and decentralised finance should inform domestic regulator decision-making.

This article was written with the assistance of Adam Nguyen Mahoney, Seasonal Clerk.

Contact

John Bassilios

John Bassilios

Partner, Fintech and Blockchain Lead

John has broad experience in financial services, funds management, blockchain, corporate and corporate law.

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