Blockchain
GFMA, IIF push back on Basel bank treatment of permissionless blockchain
Last week, the Basel Committee on Banking Supervision (BCBS) closed its December consultation regarding updates to its crypto-asset rules. Five major industry bodies responded, pushing back on the Committee’s plans to treat any permissionless blockchain tokens, including tokenized securities, as equivalent to high-risk cryptocurrencies (group 2). For assets classified in Group 2, banks must set aside significant capital, often a dollar for every dollar of crypto.
Group 1 assets include tokenized traditional securities and eligible stablecoins.
The associations responding include the Global Financial Markets Association (GFMA), the Futures Industry Association (FIA), the Institute of International Finance (IIF), the International Swaps and Derivatives Association (ISDA) and the Financial Services Forum.
Permissionless blockchains
“We note the BCBS’s conclusion that the use of permissionless blockchains gives rise to a number of unique risks, some of which cannot be sufficiently mitigated at present. We respectfully disagree with that conclusion,” the response states.
“The principle should be that, where risks can be managed, the use of public permissionless blockchains to develop tokenized assets should be allowed in order to improve efficiency.”
Hence, they argue that banks are capable of managing the risks. Smart contracts can include the ability to seize, freeze or burn tokens. Additionally, the terms and conditions of a token could give the tokenization agent the right to remove the token from the ledger and issue it in a traditional manner.
They provided an analogy between permissionless blockchains and the internet, where the foundational network is permissionless, but the applications on top of it are often gated or require permission.
“The exclusion of permissionless public networks may impact the wider development of liquid tokenization markets not least due to the potential lack of interoperability between private blockchains,” the Associations said.
They further argued the importance of not disincentivizing banks from participating because it would drive activity towards non-bank financial institutions and shadow banking. In turn, this increases systemic risks.
The associations consider the Basel treatment of permissionless blockchain contrary to technology neutrality and the principle of “same asset, same risk”.
Infrastructure risk add-on
Early Basel Committee proposals planned an infrastructure risk add-on of 2.5% applied to tokenized traditional assets. However, Basel dropped this in the final crypto rules. December’s proposed changes suggested reintroducing it but at a 0% level. Local regulators would have the option of increasing the figure.
The industry associations want to see all references to the infrastructure risk add-on removed.
Failing that, they suggest adopting a proposal of the Hong Kong Monetary Authority (HKMA) as a fallback. It too sets the risk add-on at 0%. Instead of imposing a blanket percentage across the industry, the associations suggest individual treatment. In other words, authorities would only impost the add-on if they identify a specific internal infrastructure risk at a bank.
Settlement finality
In the proposals from Basel last December, there was a clarification that settlement finality should apply to both secondary markets and the issuance of assets. However, the associations have requested that this regulation not be enforced rigidly.
Instead, they point to the evolving legal landscape on this topic. For example, with the changes in the United States Uniform Commercial Code (UCC) and England’s Law Commission review.
Instead, they suggest that a bank should ensure it understands how and when a transaction reaches finality. Additionally, the bank should conduct a legal review. They argue that the foreign exchange market takes a similar approach.
As an aside, the associations note that DLT helps reduce settlement risks.
Stablecoin issues
The industry response covers several stablecoin issues. Firstly, they are concerned about some changes that they believe prevent a bank stablecoin reserve custodian from providing any type of bank account. That’s because of an insistence on the bankruptcy remoteness of all reserves. The associations request the exclusion of cash assets from this requirement.
Still on reserves, they request permission to use reverse repo agreements. Most major stablecoin issuers use them.
Next, they request that stablecoins be allowed to be used as collateral.
Overall, they note that the Basel stablecoin requirements are more onerous than current legislation and frameworks published by the UK, EU, Singapore, Dubai and Hong Kong.
“BCBS’s amendments should not have the effect of preventing banks from exercising rights that have already been enshrined in existing regulatory and legal frameworks,” they wrote.
Additionally, they point to an inconsistency in that banks with e-money licenses are subject to far more stringent requirements for tokenized e-money.
Source: ledgerinsights.com
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Glidelogic Corp. Announces Revolutionary AI-Generated Content Copyright Protection Solution
Blockchain
Ethereum ETFs Aren’t Blockchain But Is A Revolutionary Tech: Top 6 Amazing Reasons To Invest In Them
The financial landscape is rapidly evolving, with the integration of blockchain technology and cryptocurrencies becoming more prominent. Among these, Ethereum ETFs (Exchange-Traded Funds) have emerged as a significant investment vehicle, offering exposure to the Ethereum blockchain’s native cryptocurrency, Ether (ETH), without requiring direct ownership. However, it’s crucial to understand that Ethereum ETFs are distinct from the blockchain itself and serve different purposes in the investment world.
Understanding Ethereum and ETFs
Ethereum: A decentralized platform that enables the creation and execution of smart contracts and decentralized applications (dApps). It operates using its cryptocurrency, Ether (ETH), which fuels the network.
ETF (Exchange-Traded Fund): A type of investment fund that holds a collection of assets and is traded on stock exchanges. ETFs can include various asset classes, such as stocks, commodities, or bonds.
Ethereum ETFs: The Intersection of Traditional Finance and Cryptocurrency
An Ethereum ETF provides a way for investors to gain exposure to the price movements of Ether without directly purchasing the cryptocurrency. This is achieved through an ETF structure, where the fund holds assets linked to the value of Ether, and investors can buy shares of the ETF on traditional stock exchanges.
Key Features of Ethereum ETFs:
- Indirect Exposure: Investors gain exposure to Ether’s price changes without needing to manage or store the cryptocurrency themselves.
- Regulatory Compliance: Unlike the relatively unregulated cryptocurrency market, ETFs operate under the oversight of financial regulators, offering a layer of investor protection.
- Accessibility: Ethereum ETFs are available through traditional brokerage platforms, making them accessible to a broader range of investors.
Why Invest in an Ethereum ETF?
- Diversification: Including an Ethereum ETF in a portfolio can provide exposure to the cryptocurrency market, potentially enhancing diversification beyond traditional assets.
- Convenience and Familiarity: ETFs are a familiar investment product, simplifying the process of investing in cryptocurrencies.
- Professional Management: ETF managers handle the investment decisions, including the buying and selling of assets, which can be advantageous for those less familiar with the cryptocurrency space.
- Regulatory Oversight: ETFs are subject to regulatory scrutiny, potentially offering more safety and transparency compared to direct cryptocurrency investments.
- Potential for Growth: As the cryptocurrency market grows, ETFs linked to assets like Ether may benefit from rising prices.
Key Differences Between Ethereum and Ethereum ETFs
While both are related to the Ethereum blockchain, Ethereum itself and Ethereum ETFs represent different forms of investment:
- Ethereum (ETH):
- Direct ownership of the cryptocurrency.
- Full exposure to Ethereum’s features, including staking and network participation.
- Traded on cryptocurrency exchanges.
- Highly volatile and largely unregulated.
- Ethereum ETF:
- Indirect exposure through shares representing Ether’s value.
- Traded on traditional stock exchanges under regulatory oversight.
- Offers a more stable and familiar investment structure.
- Typically lower volatility compared to direct cryptocurrency ownership.
Future Considerations for Ethereum ETFs
The approval and launch of Ethereum ETFs mark a significant milestone in bringing cryptocurrencies closer to mainstream finance. They offer a convenient and regulated means for investors to gain exposure to the growing digital assets market. However, they also come with limitations, such as not allowing direct participation in the Ethereum ecosystem’s innovations, like dApps and smart contracts.
As the market evolves, we may see more sophisticated financial products that better capture the full potential of the Ethereum ecosystem. For now, Ethereum ETFs provide a balanced option for those interested in cryptocurrency exposure within the framework of traditional finance.
In conclusion, while Ethereum ETFs offer a gateway into the world of digital assets, they should be viewed as complementary to, rather than a replacement for, direct investment in the underlying blockchain technologies. Investors should carefully consider their investment goals, risk tolerance, and the unique attributes of both Ethereum and Ethereum ETFs when making investment decisions.
Source: blockchainmagazine.net
The post Ethereum ETFs Aren’t Blockchain But Is A Revolutionary Tech: Top 6 Amazing Reasons To Invest In Them appeared first on HIPTHER Alerts.
Nexo, a leading institution in the digital assets industry, has reinforced its commitment to data security by renewing its SOC 2 Type 2 audit and attaining a new SOC 3 Type 2 assessment without any exceptions. This rigorous audit process, conducted by A-LIGN, a respected independent auditor specializing in security compliance, confirms Nexo’s adherence to stringent Trust Service Criteria for Security and Confidentiality.
Key Achievements and Certifications
- SOC 2 and SOC 3 Compliance:
- SOC 2 Type 2: This audit evaluates and reports on the effectiveness of an organization’s controls over data security, particularly focusing on the confidentiality, integrity, and availability of systems and data.
- SOC 3 Type 2: This public-facing report provides a summary of SOC 2 findings, offering assurance to customers and stakeholders about the robustness of Nexo’s data security practices.
- Additional Trust Service Criteria:
- Nexo expanded the scope of these audits to include Confidentiality, showcasing a deep commitment to protecting user data.
- Security Certifications:
- The company also adheres to the CCSS Level 3 Cryptocurrency Security Standard, and holds ISO 27001, ISO 27017, and ISO 27018 certifications, awarded by RINA. These certifications are benchmarks for security management and data privacy.
- CSA STAR Level 1 Certification:
- This certification demonstrates Nexo’s adherence to best practices in cloud security, further solidifying its position as a trusted partner in the digital assets sector.
Impact on Customers and Industry Standards
Nexo’s rigorous approach to data protection and compliance sets a high standard in the digital assets industry. By achieving these certifications, Nexo provides its over 7 million users across more than 200 jurisdictions with confidence in the security of their data. These achievements not only emphasize the company’s dedication to maintaining top-tier security standards but also highlight its proactive stance in fostering trust and transparency in digital asset management.
Nexo’s Broader Mission
As a premier institution for digital assets, Nexo offers a comprehensive suite of services, including advanced trading solutions, liquidity aggregation, and tax-efficient credit lines backed by digital assets. Since its inception, the company has processed over $130 billion, showcasing its significant impact and reliability in the global market.
In summary, Nexo’s successful completion of SOC 2 and SOC 3 audits, along with its comprehensive suite of certifications, underscores its commitment to the highest standards of data security and operational integrity. This dedication positions Nexo as a leader in the digital assets space, offering unparalleled security and peace of mind to its users.
Source: blockchainreporter.net
The post Nexo Reaffirms Commitment to Data Protection with SOC 3 and SOC 2 Compliance appeared first on HIPTHER Alerts.
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