The failures in the crypto space—including the fall of Terra USD and the FTX debacle—have sparked calls for strengthening countries’ policy frameworks for crypto assets, including by enhanced regulation and supervision. How have these heightened concerns about crypto assets been picked up in systemic risk assessment, and what can be done going forward?
In this paper, the authors Burcu Hacibedel and Hector Perez-Saiz proposed a conceptual framework and a tool to integrate macrofinancial risks from crypto assets into regulatory and systemic risk assessment frameworks. First, they introduce a macrofinancial framework to gauge, understand and track risks stemming from crypto assets comprising the so-called “stablecoins”, unbacked tokens, utility tokens, and security tokens.
Secondly, they identify areas of risk from a micro-prudential perspective. Both the macro and micro risks and vulnerabilities are then reflected in the proposed crypto risk assessment matrix (C-RAM, henceforth). The C-RAM consists of three steps starting with a decision tree followed by a country-level risk mapping and a global crypto risk assessment matrix. The country-level analysis highlights vulnerabilities and risks, analyzes potential triggers leading to systemic risk and proposes potential policy tools. The global C-RAM identifies global risks that would be exogenous to countries and have implications for macrofinancial stability. https://shorturl.at/dqCV5
Source: IBP