Securities regulators should have the power to demand foreign crypto sites be taken down, the International Organization of Securities Commissions (IOSCO) said in a Wednesday report.
The proposals from the standard setter are the latest in a series of crypto crackdowns based on worries about money laundering, tax evasion, financial stability and the rise in financial advice dished out by novel sources like social-media influencers.
Apps use techniques taken from mobile games to trick people into buying inappropriate financial products, and financial influencers, also known as "finfluencers," offer investment advice without the correct license, IOSCO also warned. Last week, reality TV star Kim Kardashian agreed to pay $1.26 million to settle U.S. Securities and Exchange Commission charges that she hyped the EthereumMax token on Instagram without disclosing that she was paid to do so.
Financial services are going online and rulemakers need to adapt, the report said. The Madrid-based organization, whose members include the U.S. SEC and counterparts from across the world, said crypto can be particularly opaque and volatile.
“Digital fraudsters can hide behind a 'digital veil' that makes it difficult for regulators to locate, identify and take action against them,” IOSCO Secretary General Martin Moloney said in a statement published alongside the guidance.
Crypto products can bamboozle investors while escaping regulations that apply to conventional finance products like stocks, the report said. Yet IOSCO thinks it has found a way to get around the problem of international crypto marketing, where sales targeted in a country like the U.S. might actually originate from a different country.
“New collaboration mechanisms may be developed to help ensure that the home regulator of wrongdoers undertake actions to stop online illegal activities (including crypto asset-related misconduct) upon request of the foreign regulator that has ascertained a violation,” the report said.
That could mean, say, the SEC asking a foreign authority to shut down or block access to illegal websites or social-media pages, to cease trades or to recover fines imposed on an overseas crypto site, the report added.
IOSCO’s report comes in the same week as the Financial Stability Board, another international standard setter, called for a comprehensive international crypto rulebook, limiting crypto companies’ ability to escape regulation by picking the easiest jurisdiction. A new IOSCO Fintech Working Group is also looking at crypto and decentralized finance in more detail.
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