As the popularity of crypto assets continues to grow, so too does the need for standards and guidelines to address the risks associated with these digital assets. In response to this need, the Accredited Standards Committee X9 Inc. (X9) has announced a new research initiative focused on the risks associated with crypto assets held by financial institutions. The initiative will develop a Technical Report titled TR 60: Risk Assessment Framework for Bank Provided Crypto-Asset Custodial Accounts, which seeks to establish a framework to assess the risks associated with custodial services, including transferring and holding crypto assets.
Crypto assets are a type of digital asset that use cryptography for data protection and employ distributed ledger technology (blockchain) to record transactions. The global crypto asset market capitalization is estimated to be around $2 trillion (U.S.), and as this financial class rapidly expands, stakeholders are calling for a regulatory framework and establishment of standards to address the issues created by this development.
X9 is seeking participants from a wide range of stakeholders such as banks, brokerages, government agencies, fintech innovators, cybersecurity experts, and academic thought leaders to help develop this Technical Report.
Developing a Framework to Assess Risks
The new Technical Report will supplement X9’s existing Blockchain Risk Assessment Framework Technical Report, which targets financial institutions’ payment services and activities involving cryptocurrencies and crypto assets. Payment services include funds transfer, message transmission, payment processing, payment settlement, value storing, and transaction recording.
The Technical Report will describe the risks associated with operating a node on a blockchain network, exchanging cryptocurrencies, buying, selling or issuing crypto assets, and custody-related assets. It will also document questions that can uncover potential hazards associated with these activities.
The goal of the new Technical Report is to provide a framework to assess the risks associated with custodial services for crypto assets, including transferring and holding these digital assets. The report will also help make progress toward needed standards in this rapidly growing financial services domain.
Joining Forces to Address the Risks
Edward Scheidt, Senior Security Development Executive Vice President at Tecsec, emphasized the importance of this new initiative, stating, “The new initiative aims to satisfy the growing need for understanding and mitigating the risks related to bank-held crypto assets, as the popularity of NFTs and other crypto assets rises.”
X9 is a non-profit organization accredited by the American National Standards Institute (ANSI) to develop and maintain national and international standards for the financial services industry. Its standards cover a range of financial topics, including retail, mobile and business payments, corporate treasury functions, blockchain technology, processing of electronic legal orders issued to financial institutions, tracking of financial transactions and instruments, financial transaction messaging, quantum computing, PKI, checks, cloud, data breach notification, and more.
By launching this new research initiative, X9 is joining forces with a wide range of stakeholders to develop a framework that will help financial institutions assess the risks associated with custodial services for crypto assets. With the global crypto asset market capitalization continuing to grow, this initiative is an important step in addressing the risks associated with this rapidly expanding financial class.
If you are interested in participating in this initiative, you can indicate your interest on the X9 website.
In conclusion, X9’s new research initiative represents a significant step towards developing standards and guidelines to address the risks associated with bank-held crypto assets. As the popularity of crypto assets continues to grow, this initiative will help financial institutions assess the risks associated with custodial services for these digital assets and make progress towards developing the needed standards in this rapidly growing financial services domain.
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