A Risk and Control Framework for Digital Financial Assets

By some estimates, the market for digital asset securities—tokenized stocks, bonds, derivatives, and other financial instruments—represents a $16 trillion opportunity. Digital asset securities offer many major benefits, among them, operational efficiency, liquidity and inclusion, automation, and traceability and auditability. But sizable roadblocks are delaying their development. These include concerns over legal and regulatory regimes, investor safety and marketplace security, and connectivity, interoperability, and operational scalability.

These are all significant issues that require resolution. To this end, BCG has collaborated with three of world’s leading financial marketplace infrastructure players—DTCC, Clearstream, and Euroclear—to develop an industrywide risk and control framework that can serve as a guide for navigating the current set of challenges.

The intention is for the framework to underpin an inclusive, resilient financial ecosystem that is adaptable to technological advancements and responsive to diverse market needs. It contains three levels that outline key principles, more than 30 risks, and development of more than 50 controls. The framework is presented in a new whitepaper, “Building the Digital Assets Ecosystem.”

The framework is designed to be asset-class agnostic and technologically neutral, ensuring its adaptability to the diverse operational requirements of organizations across the financial ecosystem. It contains six principles that offer a roadmap for the industry to come together and develop comprehensive standards for the digital asset marketplace. The principles cover the following topics.

• Legal certainty—Ensuring that operations comply with law
• Regulatory compliance—Encouraging alignment with regulatory frameworks
• Resilience and security—Developing robust infrastructure capable of resisting disruptions while protecting sensitive data
• Safeguarding customer assets—Implementing governance via smart contracts to manage assets securely
• Connectivity and interoperability—Facilitating transactions and flexible settlements across diverse networks
• Operational scalability—Striving for efficiency and cost-effectiveness through standardization

The whitepaper’s primary objectives are to establish a detailed risk and control framework, foster industry collaboration, and drive further advancement within the digital asset securities ecosystem. Industry collaboration is both the most expedient and most effective way to build a robust global digital assets ecosystem. Stakeholders can start by engaging with the new framework, evaluating its benefits for their organizations, and contributing to its evolution.