The group that sets standards for securities around the world is worried about the rise of bad financial advice on social media, including cryptocurrency.
In a report released Wednesday, the International Organization of Securities Commissions (IOSCO) said that securities regulators should be able to tell foreign crypto sites to shut down.
The standard-proposals setters are the latest in a long line of crypto crackdowns that have been prompted by worries about money laundering, tax evasion, financial stability, and the rise of unusual sources of financial advice, like social media influencers.
IOSCO also warned that apps use tricks from mobile games to trick people into buying bad financial products and that “finfluencers,” or “financial influencers,” give investment advice without the right license. Kim Kardashian, a reality TV star, just paid $1.26 million to settle charges from the U.S. Securities and Exchange Commission that she hyped the EthereumMax token on Instagram without giving the right information.
The report said that financial services are moving online, so rules need to change. The organization based in Madrid, whose members include the U.S. Securities and Exchange Commission (SEC) and counterparts from around the world, said that crypto could be especially hard to understand and volatile.
“Digital fraudsters can hide behind a “digital veil” that makes it hard for regulators to find, identify, and take action against them,” said IOSCO Secretary General Martin Moloney in a statement that was published with the guidance.
The report said that crypto products could be used to trick or scam investors while avoiding rules that apply to traditional financial products like stocks. But IOSCO thinks it has found a way to get around the problem of international crypto marketing, where sales aimed at a country like the U.S. might actually come from a different country.
“New ways of working together could be made to make sure that the wrongdoer’s home regulator takes action to stop illegal online activities (including those related to crypto assets) when asked to do so by a foreign regulator who has found a violation,” the report said.
That could mean, for example, that the SEC asks a foreign authority to shut down or block access to illegal websites or social media pages, to stop trades, or to get back fines that were put on an overseas crypto site, the report said.
In the same week that IOSCO made its request, another international group that sets standards, the Financial Stability Board, also asked for a comprehensive international rulebook for crypto. This would make it harder for crypto companies to avoid regulation by choosing the easiest jurisdiction. A new IOSCO group, the Fintech Working Group, is also looking more closely at crypto and decentralized finance.