The exposure of retail investors to crypto-assets has increased globally, leading to greater retail investor losses due to financial crime, fraud, money laundering, and under-regulated activities in the crypto-asset market. To address these challenges, BETTER FINANCE welcomes the policy recommendations for crypto and digital asset markets proposed by IOSCO. These recommendations aim to ensure a safe and stable environment for businesses, consumers, and financial service users. However, more work is needed to keep up with technological developments in the field of Digital Finance.
Transparency is essential to make finance more efficient and accessible for individual investors. FinTech initiatives like automated investment platforms, crypto-assets, and distributed ledger technologies (DLTs) can help overcome barriers such as conflicts of interest, lack of trust, financial literacy, and financial exclusion when supported by efficient policies across jurisdictions.
Several risks are associated with crypto-assets and DLTs, including the absence of a 'lender of last resort,' lack of protection systems for investments and deposits, and no clear rules and supervision for issuing and trading crypto-assets. There are also concerns about price volatility, market manipulation, and potential illegal uses of these technologies like money laundering and illegal financing.
While IOSCO's policy recommendations address key challenges, there is a need for further guidance and clarity on digital/crypto-asset definitions and their use, taking into account different jurisdictions and regional initiatives.