The International Swaps and Derivatives Association (ISDA) has begun developing global standards for derivatives linked to digital assets. The organisation recognised cryptocurrencies as a unique class of products.
ISDA intends to bring together derivatives market participants, members of the cryptoasset community and other stakeholders to help develop common legal standards and definitions for digital asset derivatives https://t.co/cB3NTWhkSC
— ISDA (@ISDA) December 14, 2021
“We must recognise that cryptocurrency assets constitute a unique class of products, and develop corresponding definitions and legal terms,” said ISDA chief executive Scott O\’Malia.
In the document published on December 14, the organisation highlighted potential risks in the crypto-derivatives market, including forks, cyberattacks, airdrops, changes in regulation, unreliability of infrastructure providers, and a weak linkage between derivative products and their underlying assets.
According to ISDA specialists, forks can affect derivatives trades, causing rises or falls in the value of the underlying asset. The degree of this impact depends on the structure of the agreement and the technical nature of the specific product.
For example, modifications to the underlying technology can fundamentally alter the nature of the digital asset (or its functionality, including compatibility with other structures) for the purposes of any derivative transaction, the document states.
Airdrops also affect derivative transactions, as “holders of assets in a given network may benefit from the distribution”.
The organisation noted regulatory-status uncertainty of cryptocurrencies and the fragmentation of the regulatory landscape. In the experts\’ view, digital assets “remain particularly vulnerable” to changes in the laws.
ISDA unites over-the-counter derivatives market participants. In December, the association was joined by Coinbase, the Bitcoin exchange, and the US arm of the trading platform FTX.
Crypto.com has entered into an agreement to purchase from the financial company IG Group Holdings two US derivatives exchanges.
Follow ForkLog news on VK VK.