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The International Swaps and Derivatives Association (ISDA) has begun developing global standards for digital asset derivatives. The organization has recognized 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 need to recognize that crypto assets are a unique class of products and develop appropriate definitions and legal terms,” said ISDA Executive Director Scott O’Malia.
In a document published on December 14, the organization highlighted the potential risks of the crypto derivatives market, among which it indicated forks, cyberattacks, airdrops, changes in legislation, the unreliability of infrastructure solution providers, as well as the weak link between derivatives and underlying assets.
According to ISDA experts, forks can affect derivatives transactions, causing the value of the underlying asset to rise or fall. The extent of this influence depends on the structure of the agreement and the technical nature of the particular product.
“For example, modifications to the underlying technology could fundamentally change the nature of a digital asset (or its functionality, including interoperability with other structures) for the purposes of any derivatives transaction,” the document says.
Airdrops also affect derivatives transactions as “the owners of assets on a particular network can benefit from the distribution”.
The organization noted the uncertainty of the regulatory status of cryptocurrencies and the fragmentation of the regulatory landscape. According to experts, digital assets “remain especially vulnerable” to changes in legislation.
ISDA brings together participants in the OTC derivatives market. In December, Bitcoin exchange Coinbase and the American division of the FTX trading platform joined the association.
Recall that Crypto.com has entered into an agreement to purchase two derivatives exchanges in the United States from financial company IG Group Holdings.
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