FRM Part II · FRM Exam Part II · Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets
A risk analyst at a bank is classifying digital assets for an internal policy. Which of the following best describes an unbacked crypto asset, as the term is used in the IMF's work on regulating the crypto ecosystem?
An unbacked crypto asset is one with no issuer liability or reserve of assets supporting its value, so its price is set by supply and demand. Bitcoin is the standard example. Stablecoins, tokenized deposits and CBDCs all have a claim or reserve behind them.
- AA crypto asset with no underlying issuer liability or reserve of assets backing its value, whose price is driven mainly by supply and demandCorrect
- BA stablecoin whose value is supported by a reserve of short-term government securities
- CA tokenized bank deposit issued by a regulated commercial bank
- DA central bank digital currency issued as a liability of the central bank
Explanation
Unbacked crypto assets, such as Bitcoin and Ether, have no issuer liability and no reserve assets behind them, so their value depends on market supply and demand. Stablecoins are backed by reserves, tokenized deposits are bank liabilities, and CBDCs are central bank liabilities.
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