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Crypto Risk Metrics products are requested by various customer groups – below, you will find descriptions of the most typical use cases.

Banks

More and more banks are seeking to provide their customers with the opportunity to invest directly or indirectly in crypto assets such as Bitcoin or Ethereum.

This is a response to the significant outflows of funds to crypto trading platforms or online brokers, which frequently facilitate trading in cryptocurrencies or crypto ETPs, often attracting the banks‘ best client groups.

The Crypto Risk Metrics support the compliance and risk control departments both in the course of the new product process and in the continuous monitoring process. Furthermore, banks also appreciate the support with AML issues and the comprehensive risk metrics, which include specific on-chain surveillance of the service providers used.

True to the motto “Don’t trust, verify”, the transparency of blockchain technology is utilized to establish adequate risk management processes.

Sascha Dölker, Head of Digitalisation at the systemically important Deutsche WertpapierService Bank AG, explains:
“Due to the new risks associated with decentralised networks, we have paid particular attention to risk management in order to be adequately positioned. We opted for the DLC tool because it meets our extensive requirements and is continuously optimized.”

Crypto Broker / Crypto MTFs

Crypto Broker and Crypto MTFs (multilateral trading facilities) are naturally exposed to a comparatively high risk in blockchain ecosystems, as the vast majority of them also serve as custodians for their customers‘ crypto assets.

However, in addition to the primary risk of a hack of their own custody solutions, cases such as the collapse of the FTX crypto exchange demonstrate the importance of paying special attention to continuous risk management of counterparties to mitigate potential losses.

Given the current situation, the strong market dependency of exclusive crypto players often presents challenges  due to the poor market situation in 2022 and 2023, cost-saving measures were made precisely in those areas not directly related to revenue generation.

Moreover, the adoption of the MiCA (Markets in Crypto Assets) regulation will finally create a standardized regulatory framework for previously unregulated players in Europe. Some of these players will need to establish adequate structures and processes for the first time, including robust risk management practices.

By utilizing IDW PS 951-certified risk management, brokers or MTFs can enhance their risk culture and gain deeper insights at the blockchain level.

The following Crypto Risk Metrics products are
frequently used by crypto broker / crypto MTFs:



Asset Managers / Capital Management Companies

Asset managers and capital management companies have been investing in crypto assets for some time now, although these investments have so far mainly been made indirectly via crypto ETPs.

The rational behind this approach, initially challenging due to additional fees and counterparty risks, is the fact that ETPs are classified as securities and can therefore be recognized and valued in the legacy systems without additional effort.

The Crypto Risk Metrics are utilized in this context to adequately assess the risk of the ETP underlyings and also for on-chain surveillance of the service providers involved in the ETP structures.

Falko Pingel, Head of Risk Management & Data Governance at HANSAINVEST Hanseatische Investment-GmbH, says:

“The specific risk vectors and possible risk management measures first became apparent to us during the project – very clearly illustrated by the Crypto Risk Metrics with case studies.

Thanks to the use of innovative processes and our adherence on established BSI standards, we now feel well-positioned. However, we recognize the importance of continually evolving with blockchain infrastructures. As one of the few capital management companies, we also empower our clients to invest directly in crypto assets.“


The following Crypto Risk Metrics products are
frequently used by asset managers / capital management companies:


Custody Banks / Depositary Banks

With the increasing importance of crypto assets and tokenized securities in particular, the demand for regulated custodians capable of sercurely storing blockchain-based assets is also growing.

From the perspective of Crypto Risk Metrics, there is still too little focus on the specific risks associated with blockchain interactions – as it is a common misconception that these risks only occur when dealing with cryptocurrencies, which is definitely not the case.

Holger Leifeld, Head of Capital Markets at Donner & Reuschel Privatbank AG, comments:

“Our first in-depth encounter with the specific challenges in risk management was during the launch of a fund aiming to invest directly in crypto assets – and has been running on our platform for several years now.

It was only in the course of the project that we realized many of the specific risks also needed to be considered one-to-one for tokenized assets. We were anything but aware of this aspect at the beginning, and we are happy to be future-proof in this area thanks to Crypto Risk Metrics.“


The following Crypto Risk Metrics products
are frequently used by custody banks / depositary banks:


ETP Investors

Many traditional companies, such as asset managers, capital management companies and family offices, do not invest directly in crypto assets such as Bitcoin or Ethereum, but rather indirectly via ETP structures.

Crypto Risk Metrics supports its clients in this process, for example, by providing dedicated prospectus analysis and near-real-time monitoring of the fund flows of the counterparties involved. By adressing various new questions, the data from Crypto Risk Metrics enable portfolio management to make risk-based decisions that are not solely based on the ETP’s TER and do not take into account aspects such as staking and lending..

Specialized monitoring of the respective staking cycles makes it possible to calculate stress scenarios and thus keep an eye on the liquidity of the product at all times, even during significant market movements.

Stefan Klaile, member of the Board of Directors of XOLARIS AG, remarks: “Many investors believe that packaged structures offer more security. In fact, however, this is often not the case or even the opposite, as we witnessed firsthand in the case of the collapse of Terra Luna, for example.


The following Crypto Risk Metrics products
are frequently used by ETP investors:


ETP Issuers

For ETP issuers, the use of Crypto Risk Metrics presents itself in the context of calculating stress scenarios and also in the course of monitoring the counterparties involved.

By continuously calculating and re-evaluating staking levels, a constant risk-based adjustment of the profit versus risk ratio can be made.

Given the existential nature of custodian counterparty risk, many ETP issuers rely particularly on this feature.

The use of risk technology is also a selling point to potential clients: if the ETP is monitored using Crypto Risk Metrics technology, the ETP’s clients can potentially build on the technology to minimise their risk.

This, in turn, helps portfolio managers during the new product process within the asset manager.

Last but not least, ETP issuers are obliged to adequately calculate the prices of their ETPs. Crypto Risk Metrics also assists in this regard by providing KARBV-compliant price data calculations.


The following Crypto Risk Metrics products
are frequently used by ETP issuers:


Data Vendors

Due to the deep integration into the legacy systems of traditional financial market participants, data vendors are a core target group of Crypto Risk Metrics.

The reason for this is that data vendors are in turn requested by their customers to provide the relevant data – from prices to the corresponding ESG data, which must be reported by all CASPs from January 1, 2025.

In addition to providing KARB-compliant price data, customers of the data vendors also rely on the risk scores provided by Crypto Risk Metrics.

Denis Dounaev, Product Owner of DTIF, comments: “We are delighted to be working with DLC to incorporate the first set of risk scores to the DTI registry, available free of charge to our users.

The digital asset markets present new risks that do not exist in traditional financial markets and require a novel approach, which DLC provides.

With this partnership, we are expanding the register beyond offering a unique identifier based on an ISO standard to include a suite of tools that will enable our users to make more informed decisions in this ever-evolving digital landscape.“


The following Crypto Risk Metrics products
are frequently used by data vendors:


Crypto Custodians

Crypto asset custodians are prime targets for hackers – high-profile cases such as Mt Gox, which initially lost 750,000 bitcoins, are just the tip of the iceberg.

And despite ongoing efforts within the industry to enhance security measures, the risk of a hack can never be completely eliminated.

Crypto Risk Metrics has developed a globally unique MEM pool monitoring system for the Bitcoin blockchain, enabling customers to detect any hacks more quickly and thus remain capable of taking action.

In addition to these primary security functions, however, Crypto Risk Metrics also provides other data, such as the „liveliness“ of the blockchains and potential issues with counterparties that collaborate with the respective crypto custodians.


The following Crypto Risk Metrics products
are frequently used by crypto custodians:


Wealth Managers

An increasing number of clients are urging their wealth managers to allocate funds to crypto assets, as the risk/reward ratio now appears highly attractive.

However, this poses several challenges for wealth managers, as offering direct investments in crypto assets classifies them as so-called CASPs“ – crypto asset service providers – requiring compliance with MiCAR regulations as well.

The Crypto Risk Metrics support wealth managers in meeting their obligations for proper risk management and also in preparing corresponding reports for their clients. 

Raphael Neuberger, Head Digital Assets at V-Bank, remarks:

“By using Crypto Risk Metrics, we ensure that we meet our regulatory requirements regarding listing, continuous monitoring and potential delistings of crypto assets at all times. This tool also enables us to realize a market conformity check, which is also required by law for every financial commission agent and proprietary trader.” 


The following Crypto Risk Metrics products
are frequently used by wealth managers:


Regulators / Auditors

Regulators and auditors can use the Crypto Risk Metrics in various ways. For instance, the tool can automatically notify regulators when a company within the supervised entities interacts with a sanctioned address.

Moreover, companies using the Crypto Risk Metrics can voluntarily consent to share data to with regulators in such cases, which is likely to be received positively.

Auditors, on the other hand, benefit from the tool’s diverse reporting options and, particularly, its state-of-the-art methodology for calculating fair market prices.

For example, as part of the market conformity check, a complex calculation method is employed to calculate virtual, volume-weighted execution prices that accurately reflect the aggregated price data from connected exchanges.


The following Crypto Risk Metrics products
are frequently used by regulators / auditors:


Token Issuers / Foundations

Depending on the chain, different risk measures are applicable – such as node distribution, the clients used, the consensus mechanism, and many more. By utilizing the data from Crypto Risk Metrics, individual risk parameters can be calculated, and appropriate countermeasures can be taken.


The following Crypto Risk Metrics products
are frequently used by Token-Issuers / Foundations: