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Financial Stability Board: Report Sets Out Framework to Monitor Crypto-Asset Markets

Hamilton, Bermuda – July 17, 2018 – In a circular to its members, The World Federation of Exchanges, announced that the Financial Stability Board published a report setting out a framework to monitor crypto-asset markets.   The circular read as follows:


Dear all,


We wanted to draw to the attention of the WFE membership an update in the realm of crypto-assets.


The Financial Stability Board (FSB) published a report - Crypto-assets: Report to the G20 on the work of the FSB andstandard-setting bodiesfor the G20 Finance Ministers and Central Bank Governors’ meeting in Buenos Aires from 21-22 July 2018.


As well as the FSB, the report provides and overview of the work of the Committee on Payments and Market Infrastructures (CMPI), International Organization of Securities Commissions (IOSCO) and the Basel Committee on Banking Supervision (BCBS).


The FSB notes that virtual currencies’ growth, trading volumes, pricing, clearing and margining will be tracked by global financial authorities to monitor potential risks to the wider world. Also outlined in the report, the FSB will monitor financial companies’ exposures to crypto-assets, and traders’ leverage. Other authorities are looking at blockchain developments, initial coin offerings, banks’ exposures, plus risks of money laundering and terrorism financing from digital media of exchange.


The objective of the framework is to identify any emerging financial stability concerns in a timely manner. As such, the framework analyses the primary risks within crypto-assets and potential transmission channels to financial stability risks. The framework identifies which metrics the FSB might usefully monitor in the short-to-medium term, as well as further insight into some monitoring objectives that would take longer to implement, but may be more appropriate should financial stability concerns increase. The FSB selected metrics for the monitoring framework based upon several criteria, including comparability over time and across jurisdictions, ease of access and repeatability, degree to which the metric is anchored in data, and analytical effort to compute.



Other standard-setting bodies


The CPMI’s workplan for innovation in this space consists of:


       Outreach, advising central banks to proceed with caution on central bank digital currencies (CBDCs).


       Monitoring of CBDCs and private digital tokens used for payments, including the development of decentralised tokens with improved technology and/or underlying assets (so-called ‘second generation cryptocurrencies’). A survey of global central banks is planned for later in 2018 to further inform the CPMI’s work.


       Analysis, focussing on the safety and efficiency considerations for wholesale digital currencies (both public and privately issued variants).


IOSCO have outlined that maintaining market integrity becomes an issue when trying to determine whether a crypto-asset is a security, commodity, or some other financial product, or the way in which such platforms operate and define themselves. The report notes that “’crypto-exchanges’ may be exchanges that are failing to comply with the laws applicable to exchanges”. IOSCO’s Committee on Secondary Markets has preliminarilyidentified a number of key issuesit may consider including: (i) transparency; (ii) custody and settlement; (iii) trading; and (iv) cyber security and systems integrity.


The report notes that the BCBS is looking at number of policy and supervisory initiatives, which can be grouped into three categories: (i) quantifying banks’ exposures to crypto-assets; (ii) prudential treatment of crypto-assets; and (iii) monitoring and assessing crypto-asset and FinTech developments.


The FSB believes the following metrics provide a useful picture of crypto-asset markets and the financial stability risks they may present.


Metrics to be initially monitored by the FSB1,2






Primary risks / basic market

Market capitalisation (size and rate

BIS, based on public sources


of growth), price levels and volatility



of major crypto-assets



Developments in non-FSB



jurisdictions (qualitative)


Confidence effects

Qualitative market intelligence

Periodically by the FSB, from



members and through regular calls




and meetings

Wealth effects / market

Market capitalisation metrics

BIS, based on public sources



Size and rate of growth




ICO issuance




Inflows / outflows from fiat







Price metrics

BIS, based on public sources



Price levels




Price volatility




Rate of growth


Institutional exposures

Derivative metrics

FSB Secretariat and member



Trading volumes

authorities, based on publicly



Price levels and open

available CCP disclosures and / or




publicly available market data



Number and type of clearing











Market capitalisation metrics

As above


Banks’ exposures to crypto-assets


Payments and settlement

Wider use in payments and

CPMI, based on member and



collective intelligence gathering


Comparisons of volatility and

BIS, based on public service


correlations between major



cryptocurrencies with other asset



classes such as gold, currencies,







As the thinking behind this develops and new sources of public data become available, the FSB, with CPMI, will consider how improvements can be made. The FSB will, where possible, continue to work on assessing data reliability and data completeness for the existing metrics. As well as reviewing the possibility for new metrics in the future.



1As technology evolves and market conditions develop, other metrics may be appropriate for collection if the FSB deems it necessary.


2Any analysis of the metrics as well as the interpretation of the results, should appropriately take into account the information outlined in the disclaimer on data quality and reliability.







Crypto-assets: Report to the G20 on the work of the FSB and standard-setting bodies


This report delivered to the G20 Finance Ministers and Central Bank Governors for their meeting in Buenos Aires from 21-22 July, describes the work of the FSB and standard-setting bodies on crypto-assets.


The FSB has developed a framework, in collaboration with Committee on Payments and Market Infrastructures (CPMI), to monitor the financial stability implications of the developments in crypto-asset markets. The report sets out the metrics that the FSB will use to monitor developments in crypto-asset markets as part of the FSB’s ongoing assessment of vulnerabilities in the financial system.


While the FSB believes that crypto-assets do not pose a material risk to global financial stability at this time it recognises the need for vigilant monitoring in light of the speed of market developments. The framework focuses on the transmission channels from crypto-asset markets. Monitoring the size and growth of crypto-asset markets is critical to understanding the potential size of wealth effects, should valuations fall. The use of leverage, and financial institution exposures to crypto-asset markets are important metrics of transmission of crypto-asset risks to the broader financial system. The framework also includes metrics on trading volumes, pricing, clearing and margining for crypto-asset derivatives. Metrics on exposures will become part of the framework to the extent that they become available.


FSB Chair Mark Carney in his letter to G20 Finance Ministers and Central Bank Governorsin March noted that crypto-assets raise a host of issues around consumer and investor protection, as well as their use to shield illicit activity and for money laundering and terrorist financing. At the same time, the technologies underlying them have the potential to improve the efficiency and inclusiveness of both the financial system and the economy.


Against this backdrop, the report also describes the work standard-setting bodies are undertaking in the areas of their respective mandates:


       CPMI has conducted significant work on applications of distributed ledger technology, and is conducting outreach, monitoring, and analysis of payment innovations.


       The International Organization of Securities Commissions (IOSCO) has established an initial coin offering (ICO) Consultation Network to discuss experiences and concerns regarding ICOs, and is developing a Support Framework to assist members in considering how to address domestic and cross-border issues stemming from ICOs that could impact investor protection. IOSCO is also discussing other issues around crypto-assets, including, for example, regulatory issues around crypto-assets platforms.


       The Basel Committee on Banking Supervision (BCBS) is assessing the materiality of banks’ direct and indirect exposures to crypto-assets, clarifying the prudential treatment of such exposures, and monitoring developments related to crypto-assets for banks and supervisors.


The Financial Action Task Force will report separately to the G20 on its work concerning the money laundering and terrorist financing risks relating to crypto-assets.





The report can be found by using the following link:


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