The International Organization of Securities Commission (IOSCO) is calling on global regulators to get tougher on crypto exchanges.
IOSCO Has Money Laundering Concerns
The international watchdog IOSCO has cautioned regulators this week to look into how cryptocurrency exchanges assess their investors. This, the entity maintains, will cut down on money laundering activity.
Beyond obvious stricter KYC policies, the watchdog has even suggested that regulators should consider restricting crypto-asset trading platforms (CTPs) to working with regulated intermediaries trading on behalf of their clients. It also wants regulators to assess whether CTP clients are being given “sufficient risk disclosures.”
Not only would this serve to protect investors, IOSCO argues, but it could cut down on illegal activity. When you consider the plethora of dubious exchanges like the now-defunct Cryptopia and their woefully insufficient AML policies, the suggestions from IOSCO may seem to come from a good place.
However, adding yet another intermediary into the cryptocurrency space in the form of a regulated broker is not going to win any popularity contests. It should be noted, however, that IOSCO has not issued any binding policy, stating:
It is not possible or appropriate to provide a definitive list of the risks, issues, and outcomes at this time, nor is it appropriate to prescribe new standards or requirements.
The FATF’s Travel Rule
It appears that the IOSCO suggestions have not been spurred merely from exchange hacks, exit scams, and lax KYC. The entity clearly wants to keep up with the recent implementation of the travel rule too, which was created by the Financial Action Task Force (FATF).
The FAFT is comprised of several member countries including the United States and the EU with the goal of joining forces to combat money laundering globally. The newly-imposed travel rule forces CTPs to collect and share extensive identifying information on its users who make transactions between virtual asset providers.
Crypto Investors Should Be Compensated for Losses
IOSCO also had something to say about compensating investors for funds lost due to hacks or insolvency. It urged regulators to either impose capital controls on CTPs or ensure that they have insurance funds or compensation policies in place.
This consideration emerged amid concerns over the way digital assets are custodied and stored, which often leaves them exposed to cyber threats and fraud–and investors out of pocket.
What do you make of the IOSCO’s recommendations? Add your thoughts in the comment section below!
Images via Shutterstock, Twitter
[Source] Author: Christina Comben
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