The IIF has responded to the International Organization of Securities Commissions’ (IOSCO’s) consultation report on policy recommendations for crypto and digital asset markets. In its submission, and in line with previous submissions to FSB's consultation on crypto-assets and stablecoins and the Basel Committee on Banking Supervision (BCBS) on the prudential treatment of crypto-asset exposures, the IIF advocates for a measured approach that does not unduly restrict the ability of regulated financial institutions to prudently engage in crypto-asset activities, such that associated risks will be subject to robust, sound risk management practices. Additionally, we continue to strongly advocate for technology neutrality as a guiding principle for regulation in this space, and agree with the principle of “same risk, same regulatory outcome”.

The IIF and its members make the following observations on articulation and scope of IOSCO’s Recommendations:

• The scope of the term “crypto-asset” as defined in the consultation report is very broad. As there are many areas in the Recommendations where a narrower scope of application would be appropriate, we recommend this be made clear in the scope section of the paper.
• In addition, IOSCO should clarify that for the purpose of its Recommendations, the term “crypto-asset” is not intended to apply to books and records systems using DLT or blockchain infrastructure, including internal treasury or other such systems, including those covering affiliates within a financial institution group.
• Tokenized bank deposits are different from stablecoins and crypto-assets, depending on how they are structured, and need to be distinguished as such. We accordingly seek clarification that they would not be within the scope of crypto-assets covered by the Recommendations. 
• On cross-border, in our view, there should be a positive statement that jurisdictions should consider permitting incoming services from other jurisdictions in relation to which determinations have been made that a sufficiently comparable regulatory regime with regard to the risks addressed by the Recommendations has been implemented and that suitable cooperation arrangements with local regulators have been established.
• On crypto-assets custody, we believe it is important to clarify the expectations around stablecoins’ underlying reserve assets, and that segregation of client assets from the assets of CASPs and stablecoin issuers is not an end in itself and must actually achieve remoteness of client assets from the bankruptcy of the CASP or issuer.

Lastly, the IIF stresses the importance of a regulatory approach that recognizes the dynamic nature of this asset class and supports a framework designed to evolve with it.

This comment letter continues the close engagement of the IIF with central banks, regulators, and global standard setting bodies on the development of crypto and digital asset market regulation.