![]() To navigate the opportunities and risks effectively, traditional finance firms need to leverage their experience with risk management and embed digital asset activities into their overall risk and compliance frameworks. Areas of concern include the lack of familiarity with digital assets and the related technology, how digital assets align with existing service offerings and increasing regulatory scrutiny. Some traditional finance firms are implementing targeted digital asset strategies due to increased customer interest but are doing so cautiously. Traditional finance firms: Proactive risk mitigation is key Together, this can help to foster responsible digital asset innovation. In the current uncertain environment, each of these three key ecosystem participants – traditional finance firms, crypto natives and policymakers – can benefit from leveraging proven frameworks and approaches. Policymakers have a different take, seeking to mitigate risks to investors and markets, while at the same time contemplating their own digital assets. The views of traditional finance firms with well-established governance processes differ from those of crypto-native companies that are strong on technology but can lack risk management experience. Stakeholders in the digital asset market will have different views and needs, depending on their role within the ecosystem, organizational history, management experience and the broader applications they have used. What proactive steps should traditional finance firms and crypto natives take to get ahead of upcoming digital asset regulation? In our report, “Managing the digital assets environment: Key considerations for traditional finance firms, crypto natives and policymakers,” we argue that there is no need to reinvent the wheel: proven risk management and regulatory approaches can be applied to the digital assets’ universe.ĭigital assets range from tokens that may or may not mimic securities, to stablecoins and Central Bank Digital Currencies (CDBCs). The Financial Stability Board, a group of national financial authorities and international standard-setting bodies, is also expected to publish a report in October 2022 for the G20 on regulatory and supervisory approaches to stablecoins and other crypto-assets. Just last month, the US Federal Reserve issued guidance for banks, which can be viewed as an important step in creating a supervisory process for banks engaging in activities involving digital assets. Policymakers cannot ignore this kind of disruption. This crash in value – coupled with the collapse of Luna/Terra tokens, the hedge fund Three Arrows and a range of crypto investment firms – is fueling concerns about the risks that digital assets pose to consumers, investors and financial systems. The global market value rose to US $3 trillion at the end of 2021 and has plunged to less than US$1 trillion in recent months. ![]() The crypto asset market is experiencing alarming volatility. ![]()
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