Risk Assessment
8.
(a)
(i) The technological experience, track record and reputation of the issuer and its development team;
(ii) The availability of a reliable multi-signature hardware wallet solution;
(iii) The protocol and the underlying infrastructure, including whether it is: (1) a separate blockchain with a new architecture system and network or it leverages an existing blockchain for synergies and network effects, (2) scalable, (3) new and/or innovative or (4) the crypto-asset has an innovative use or application;
(iv) The relevant consensus protocol;
(v) Developments in markets in which the issuer operates;
(vi) The geographic distribution of the crypto-asset and the relevant trading pairs, if any;
(vii) Whether the crypto-asset has any in-built anonymization functions;
(viii) crypto-asset exchanges on which the crypto-asset is traded.
(b) Operational risks associated with a crypto-asset . This includes the resulting demands on the licensee’s resources, infrastructure, and personnel, as well as its operational capacity for continued client on-boarding and client support based on reasonable forecasts considering the overall operations of the licensee ;
(c) Risks associated with any technology or systems enhancements or modification requirements necessary to ensure timely adoption or offering of any new crypto-asset ;
(d) Risks related to cybersecurity: Whether the crypto-asset is and will be able to withstand, adapt and respond to, cyber security vulnerabilities, including size, testing, maturity, and ability to allow the appropriate safeguarding of secure private keys;
(e) Traceability/Monitoring of the crypto-asset : Whether licensees are able to demonstrate the origin and destination of the specific crypto-asset , whether the crypto-asset enables the identification of counterparties to each trade, and whether transactions in the crypto-asset can be adequately monitored.
(f) Market risks, including minimum market capitalisation, price volatility, concentration of crypto-asset holdings or control by a small number of individuals or entities, price manipulation, and fraud;
(g) Risks relating to code defects and breaches and other threats concerning a crypto-asset and its supporting blockchain, or the practices and protocols that apply to them;
(h) Risks relating to potential non-compliance with the requirements of the licensee’s condition and regulatory obligations as a result of the offering of new crypto-asset ;
(i) Legal risks associated with the new crypto-asset , including any pending or potential civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of the new crypto-asset ; and
(j) Type of distributed ledger: whether there are issues relating to the security and/or usability of a distributed ledger technology used for the purposes of the crypto-asset; whether the crypto-asset leverages an existing distributed ledger for network and other synergies; whether this is a new distributed ledger that has been demonstrably stress tested.
Added: January 2024