Digital asset risk management diagnostic

Anticipating digital asset regulatory policies

Despite a “crypto winter,” banking turmoil, and regulatory disagreements, opportunities in the digital assets marketplace continue to exist. Since the White House released an executive order on March 9, 2022, ensuring responsible development of digital assets and detailing policy across key priorities, regulators have planned to address these concerns within the context of their respective oversight mandates with specific requirements around safety and soundness, consumer protection, and market integrity.¹

In addition to the adherence of new policy, regulators expect that firms will establish or enhance their risk and control frameworks and conduct risk assessments specific to the characteristics of the underlying products and technologies. This is highlighted in the Office of the Comptroller of the Currency (OCC) Interpretive Letter 1176, which outlines the requirement of firms to have adequate controls in place before taking part in digital asset activities.² Regulatory bodies like the OCC are looking to discern the ongoing and prospective digital assets–related activities carried out by financial institutions.

Deloitte’s digital asset risk assessment tool

Engaging with digital assets requires active management oversight across a wide spectrum of risks and the leverage of core safety and soundness playbooks to meet the expectations of regulators. One of Deloitte’s industry-leading tools is a digital asset risk assessment designed to help organizations identify digital asset–specific risks that need to be mitigated to engage in the marketplace in a manner consistent with regulatory expectations and overall risk assessment objectives.

Leveraging our blockchain-related experience, we have developed a proprietary risk assessment tool composed of more than 300 unique blockchain and digital asset targeted risks. The tool provides a baseline view of risk applicability across many of the emerging service offerings in the digital asset marketplace, taking into consideration the nuanced and evolving development of digital asset products, such as cryptocurrencies versus central bank digital currencies (CBDCs). It is important to note that this tool, along with any risk assessment tool, is to be viewed as an accelerator rather than a blanket or universal solution. With more than a decade of blockchain and digital asset experience,³ our team works closely with executive stakeholders to fully understand the specific service offering and product scope of their operating model before conducting the risk assessment.

For clients exploring digital asset–related use cases or who are early in the development life cycle, Deloitte can leverage its framework to provide a clear understanding of the unique risks they may be exposed to and help map out capabilities to further develop in order to engage in the space. For other clients who are further along in the development life cycle, Deloitte can leverage its framework to efficiently conduct a risk assessment on new digital asset–related products. In doing so, our clients may not only gain a better understanding of the potential risks their new digital asset product may pose, but also determine whether they have in place or need to implement the mitigating controls necessary to deploy a product that aligns with regulatory expectations.