The International Swaps and Derivatives Association (ISDA) is working on two papers to address legal risks in the crypto markets, according to a statement released on January 26.
The papers will provide guidance for market participants regarding crypto ownership and the role of intermediates in the event of bankruptcy, such as the insolvency of crypto exchange firms.
The papers will also offer standards on close-out netting and collateral, and address issues relating to customers’ digital assets held with intermediaries and how they may be held and treated in an insolvency scenario.
They will also inform the legal and documentation needed to establish ownership of digital assets and their use as collateral.
The initiative was prompted by the collapse of crypto exchange FTX and previous bankruptcy cases that “prompted a cascade of liquidity and solvency concerns across the crypto ecosystem.”
ISDA is a private trade association that comprises primarily banks that transact in the over-the-counter derivatives market and seeks to identify and reduce risks in the markets.
