IOSCO has stressed that operating as a DAO does not exempt entities from regulatory responsibilities, urging adherence to existing international policies for DeFi. The global standards setter for securities markets regulation, representing around 130 jurisdictions, has issued guidance on overseeing the decentralised finance (DeFi) industry.

The International Organisation of Securities Commissions (IOSCO), whose members oversee over 95% of global securities markets, released policy recommendations for DeFi shortly after publishing recommendations for regulating crypto markets in November 2023. Applying traditional rules to DeFi Regulators have struggled to tackle DeFi, which, in theory, lacks a central body that could be subject to supervision. But IOSCO, in a September 2023 report, told governments to find out who's responsible for innovative financial applications and regulate them as they would traditional finance.

The regulator said that given the similar economic functions and activities of DeFi and traditional financial markets, many existing international policies, standards, and jurisdictional regulatory frameworks are applicable to those DeFi activities and those mechanisms that govern them. In cases where existing rules don't apply, they should be modified to do so, IOSCO said. The guidance on DeFI covers how to identify the people responsible, how to set clear disclosure requirements and how to enforce laws.

Responsible persons include anyone ‘exercising control or sufficient influence over a financial product offered, financial service provided, or financial activity engaged in (or over products, services, and activities that behave like, or have been substituted by investors for, financial products, services, and activities) by the DeFi arrangement.’ Therefore, operating as a decentralised autonomous organisation (DAO) rather than incorporating does not ‘abdicate these persons and entities of their regulatory responsibilities,’ IOSCO said. ‘Regardless of the labels, organisational forms, or technologies used, persons and entities who offer or provide financial products and services and engage in financial activities should be subject to applicable laws.’ Other authorities previously called for more DeFi regulation In May 2022, executives from Germany's Federal Financial Supervisory Authority (BaFin), have called for standardised regulation of DeFi across the European Union. They highlighted the risks to consumers in the unregulated DeFi space, emphasising the need for regulatory considerations and legal clarity.

BaFin, responsible for regulating banks, insurance firms, and cryptocurrency companies, plays a crucial role in issuing crypto custody licenses within Germany. .