Skip to content

FRM Part II · FRM Exam Part II · Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets

A bank risk officer reviews a jurisdiction that has chosen to 'contain' crypto risks. Which measure is most consistent with that approach?

Conservative prudential treatment, such as exposure limits and high capital charges on banks' direct and indirect crypto exposures, is consistent with containment because it limits transmission of crypto risks into the regulated financial system. Encouraging adoption or easing safeguards would do the opposite.

  1. ARequiring banks to hold a prudential treatment that limits and conservatively capitalizes direct and indirect crypto exposuresCorrect
  2. BEncouraging pension funds to allocate to crypto to diversify
  3. CExempting crypto trading platforms from AML requirements to encourage growth
  4. DPermitting banks to use unbacked crypto as high-quality liquid assets

Explanation

Containment relies on prudential limits and conservative capital treatment to cut transmission channels to regulated institutions. The other options deepen integration or weaken safeguards, which contradicts containment.

Did you get it right without looking?

One question tells you little. A timed set on Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets shows your real accuracy, how long you take and where you lose marks.

Practise Regulating the Crypto Ecosystem: The Case of Unbacked Crypto AssetsFree diagnostic mock

More Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets questions