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On December 19, 2023, the International Organization of Securities Commissions (IOSCO) released a report on decentralized finance that addresses market integrity and investor protection. The report includes nine policy recommendations for decentralized finance regulators to follow. Decentralized financial structures include financial products and arrangements that use distributed ledger or blockchain technology. IOSCO’s policy recommendations on decentralized finance complement similar reports on cryptocurrency and digital asset markets found on InfoBytes. Policy recommendations include: (i) Regulators should analyze decentralized financial products, services, and activities within their jurisdictions. (ii) Regulatory authorities must identify individuals or entities that may be subject to the regulatory framework. (iii) Regulators should use a framework for regulating and addressing risks arising from decentralized finance that complies with IOSCO standards. (iv) Regulators should require responsible parties to address conflicts of interest. (v) Regulators should require responsible parties to address material risks, including operational and technical risks. (vi) Regulators should require responsible parties to clearly disclose information to users and investors. (vii) Regulators should apply comprehensive powers to decentralized financial services to detect and enforce violations under the law. (viii) Regulators should cooperate and share information with other regulators and authorities. (ix) Regulators should seek to understand how decentralized financial products connect with traditional financial markets as well as crypto asset markets. In the final section of the report, he summarized the feedback he received from 45 stakeholders across eight categories.
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