Securities regulators have called for the identification of individuals exercising control over Decentralized Finance platforms

The International Organization of Securities Commissions (IOSCO) has urged regulators seeking to understand DeFi (Decentralized Finance) arrangements to confirm the status of “individuals exercising control or sufficient influence at the corporate level.” Confirming the identity of such individuals has the potential to enable regulators to identify “existing or potential regulatory touchpoints”.

Understanding Decentralized Finance Arrangements at the “Economic Reality” Level

The International Organization of Securities Commissions (IOSCO) urged its members seeking to regulate DeFi entities to first “understand Decentralized Finance arrangements in terms of economic reality or ‘corporate level’.” To achieve this goal, IOSCO, an association of securities regulators, encourages its members to identify “individuals with sufficient influence at the corporate level or in the exercise of control.”

According to the association’s final report, which makes policy recommendations for regulating the Decentralized Finance market, confirming the identity of such individuals will enable regulators to identify “existing or potential regulatory touchpoints.” In addition to reviewing publicly available information, regulators seeking to identify so-called touchpoints should also consider collaborating with relevant persons such as academics or researchers.

The association added:

"In addition, they may consider using available investigative tools and techniques to gather additional information, including relevant information-sharing arrangements with other authorities within and outside their jurisdiction. ”

Addressing Market Integrity and Investor Protection Concerns

In its 66-page report, IOSCO also urged regulators to understand the activities or services offered by Decentralized Finance platforms to determine whether they are Financial Service provided by the platforms themselves or by the individuals associated with them. It also outlines the steps regulators should take as they seek to find the ideal way to regulate entities controlled by DAOs.

Meanwhile, in the summary of the report, IOSCO claims that the nine policy recommendations made in the report are all aimed at addressing market integrity and investor protection issues arising from the activities of Decentralized Finance platforms. The report also added that the recommendations help the association achieve its goal of promoting greater consistency in the regulation and supervision of the cryptoasset market.

As stated in IOSCO’s final report, the recommendations are intended to build on the March 2022 report, which provides what the association calls a “comprehensive picture of the Decentralized Finance market.” Both reports are part of IOSCO’s ultimate superficial goal to ensure that global market regulators take a “same activity, same risk, same regulatory/regulatory outcome” approach to Decentralized Finance.

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