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.”
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.
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.”
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.