ADAN's Response to the IOSCO Report on Retail Market Conduct

Since their emergence in 2008, crypto-assets have been increasingly adopted by individuals. Recent studies reveal that by 2021, more than 200 million people worldwide will hold crypto-assets, meaning this is no longer a niche market. Thereportreleased for public consultation by the IOSCO is therefore an excellent initiative, according to ADAN, given the growing interest among retail investors in crypto-assets.

In summary, ADAN wished to bring several points to the attention of the IOSCO: 

1. Regarding the oversight of crypto-asset trading by retail investors: innovative services based onblockchaintechnologies(such asblockchainanalysis, the collection and use ofon-chain data, decentralized identity, etc.) offer new opportunities for regulators to understand the risks that crypto-assets pose to consumers. Imposing existing rules that are not tailored to the specific characteristics of blockchain use cases would result in missing the opportunity to provide a sufficient level of protection for retail users. 

2. ADAN believes that IOSCO’s misguided approach to crypto-assets could lead to inappropriate regulatory requirements for crypto-asset markets (for example, by asserting that popular crypto-assets have no intrinsic value). For retail users,crypto-assets offer (1) greater access to financial services—particularly in underbanked regions, (2) the opportunity for retail users to access financial services (such as options), which were previously available only to investment firms and professional traders, and most importantly (3) a means of hedging against certain inflationary trends. 

3. The COVID-19 crisis has led to a significant increase in people staying at home worldwide, which has facilitated the adoption of crypto-assets by retail users. The COVID-19 pandemic has also led to a rise in cyberattacks—a rise that is by no means unique to the crypto-asset sector. According to ADAN, it is important to educate retail users on how to hold, use, and trade crypto-assets and to choose appropriate solutions to limit their exposure to risks.In this context, the role of ecosystem participants is essential in helping users better understand the risks to which they are exposed. 

4. While decentralized finance (DeFi) introduces new risks to the crypto-asset ecosystem (particularly technological risks), its potential for innovation is significant and offers numerous benefits to individual users.From a regulatory perspective, DeFi cannot be equated with the investment services offered by traditional financial institutions, as traditional regulations would be inapplicable or even counterproductive for these protocols.