DeFi Policy Recommendations Issued by Global Securities Regulator IOSCO

• International Organization of Securities Commissions Releases Guidelines on Decentralized Finance
• DeFi and The Regulatory Challenges
• Applicability of Existing Policies and Regulations
• Guidelines for Identifying Responsible Parties
• DeFi and Decentralized Autonomous Organizations (DAO)

International Organization of Securities Commissions Releases Guidelines on Decentralized Finance

The International Organization of Securities Commissions (IOSCO) has released a new roadmap for handling decentralized finance (DeFi). This comes as members from over 130 jurisdictions worldwide attempt to manage regulation within the industry. IOSCO, whose members oversee more than 95% of global securities markets, issued its policy guidelines for DeFi on Tuesday.

DeFi and The Regulatory Challenges

Regulatory authorities have had difficulty addressing DeFi due to its decentralized nature, making it hard to find a central body that could be subject to control. However, IOSCO proposed in its September report that governments should determine who is accountable for innovative financial solutions, and regulate them similarly to traditional finance.

Applicability of Existing Policies and Regulations

Given the similar economic functions and activities of DeFi and traditional financial markets, many existing international policies, standards, and jurisdictional regulatory frameworks are applicable to DeFi and the mechanisms that govern them, stated IOSCO. Where current regulations are not applicable, IOSCO suggested that modifications should be made to accommodate this.

Guidelines for Identifying Responsible Parties

The guidelines for DeFi issued by IOSCO include methods to identify responsible individuals or parties, establish clear disclosure requirements, and enforce laws. Responsibility lies with anyone exercising control or sufficient influence over a financial product offered, financial service provided, or financial activity engaged in (or over products, services, and activities that behave like, or have been substituted by investors for, financial products, services, and activities) by the DeFi arrangement.

DeFi and Decentralized Autonomous Organizations (DAO)

According to IOSCO, operating as a Decentralized Autonomous Organization (DAO) rather than incorporating does not absolve parties from their regulatory obligations. IOSCO stated: Regardless of the labels, organizational forms, or technologies used, persons and entities who offer or provide financial products and services and engage in financial activities should be subject to applicable laws.

Edited by Jonathan Stoker