The Federal Reserve proposes to set initial margin weights for cryptocurrency derivatives

The analysis report released by the Federal Reserve on Wednesday recommends classifying cryptocurrencies as a separate asset class for initial margin requirements in the "unsettled" derivatives market, including over-the-counter trading and transactions that have not been cleared through a centralized clearing house. The report points out that the volatility of floating cryptocurrencies such as Bitcoin and Ethereum, as well as anchor type cryptocurrencies such as stablecoins, is significantly different from traditional asset categories and cannot be classified according to the risk classification of existing standardized margin models. The author suggests setting differentiated risk weights for two types of encrypted assets and calibrating the risk weights by constructing benchmark indices to simulate market volatility. The initial margin mechanism requires traders to pledge collateral to prevent default risk, and the high volatility of encrypted assets requires a higher proportion of collateral buffer. The report shows that the federal level in the United States is making technical preparations for the inclusion of encrypted assets in the regulatory framework.