IOSCO Provides Guidance on Decentralized Finance Regulation

According to CoinDesk, the International Organization of Securities Commissions (IOSCO) has published policy recommendations for decentralized finance (DeFi) as its members, representing over 130 jurisdictions, consider ways to supervise the industry. IOSCO's members regulate more than 95% of the world's securities markets. The guidance comes just a month after the organization published recommendations for regulating crypto markets. Regulators have faced challenges in addressing DeFi due to its decentralized nature, which lacks a central body for supervision. However, IOSCO's September report urged governments to identify those responsible for innovative financial applications and regulate them as they would traditional finance. The regulator stated that many existing international policies, standards, and jurisdictional regulatory frameworks are applicable to DeFi activities and the mechanisms that govern them. In cases where existing rules don't apply, they should be modified accordingly. The guidance on DeFi covers how to identify responsible persons, set clear disclosure requirements, and enforce laws. Responsible persons include anyone 'exercising control or sufficient influence over a financial product offered, financial service provided, or financial activity engaged in by the DeFi arrangement.' Operating as a decentralized autonomous organization (DAO) does not exempt these individuals and entities from regulatory responsibilities, according to IOSCO. The organization emphasized that regardless of labels, organizational forms, or technologies used, those who offer or provide financial products and services and engage in financial activities should be subject to applicable laws.