Regulators need to cooperate on regulation that allows innovation such as crypto, urged Martin Moloney, secretary general of International Organisation of Securities Commissions (IOSCO).
Speaking at the Investment Association (IA) annual conference on 20 June, Moloney pointed out that one of the challenges to innovation is a lack of consensus across jurisdictions.
He noted that IOSCO issued 18 recommendations as to how crypto trading firms should be regulated, adding that under six headings and 18 recommendations, the report made a “number of simple, penetrating points”.
These include minding clients’ assets safely, avoiding or managing conflicts, and running well supervised trading venues.
However, he said that while these recommendations apply to all businesses in the finance sector, the question mark hangs over a number of fintechs because they can’t comply with the “highest standards and recommendations”.
He added that this creates a challenge of how to transition a successful firm from an unregulated market to a regulated market, especially if it has been unregulated for too long.
“We should not have ended up here,” Moloney said, adding that “globally we do not have a strong model of how to encourage innovation in a highly regulated sector like finance”.
He explained that some jurisdictions “remain convinced that providing a more relaxed environment for innovation in their jurisdiction can prove advantageous in terms of building a financial centre”.
Moloney said he finds it “frustrating”, adding that many jurisdictions apply outdated policies.
He pointed out that a “deep and specialised” engagement is required by regulators, or innovation will be “subject to inappropriate obstacles”.
He said: “We need similar standards for regulation of crypto across the world, so that we can have regulatory cooperation across the world.
“Similarly, we need ever closer convergence in dealing with innovation in the financial sectors across borders so that there can be a critical mass to underpin effective innovation, which you often won’t get within jurisdictions.”
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