The Federal Reserve is considering a new approach to crypto risk. In a working paper released Wednesday, researchers proposed treating cryptocurrencies as a standalone asset class and applying dedicated margin requirements designed for their sharp price swings and trading behavior.
The paper was written by Anna Amirdjanova, David Lynch, and Anni Zheng. It argues that existing derivatives margin systems group exposures into traditional buckets such as equities, interest rates, and commodities, while crypto does not fit cleanly into any of them. Price moves can be fast, and the drivers behind them often differ from those seen in conventional markets.
Current margin models may understate crypto-specific risk
According to the paper, traders may be underestimating risk under the current framework. The researchers recommend assigning specific risk weights to cryptocurrencies rather than forcing them into legacy asset categories. They also call for a distinction between “floating” cryptocurrencies such as Bitcoin and Ether and pegged stablecoins, so margin treatment can reflect different risk profiles more accurately.
The proposal is especially relevant for derivatives markets, including uncleared over-the-counter contracts. These trades carry higher risk because no central clearinghouse stands behind the transaction. Margin acts as a buffer against default, helping ensure both sides can meet their obligations if markets move abruptly. The paper notes that derivatives traders use borrowed funds to amplify positions, increasing potential gains while also increasing the chance of losses.
Benchmark index proposed for dynamic collateral adjustments
To improve margin calibration for volatile crypto assets, the team suggests creating a benchmark crypto index that combines floating cryptocurrencies and stablecoins. Financial institutions could use that index to monitor market behavior and adjust collateral requirements more dynamically. The logic is simple: if crypto trades differently from other asset groups, margin models should respond to crypto market conditions rather than rely on older assumptions.
The proposal also fits into a wider shift in the Fed’s posture toward digital assets. Instead of focusing only on limiting exposure, the central bank is now examining structures that could integrate crypto into the financial system with clearer controls. The source material says the Fed reversed earlier guidance in December that had restricted banks’ engagement with crypto.
“Skinny” master accounts are part of the broader discussion
Beyond margin rules, the Fed is also exploring “skinny” master accounts for crypto firms. Such accounts would offer access to central banking infrastructure without granting full privileges. Taken together, these measures point to an effort to give banks and crypto-related companies clearer and more consistent operating rules while placing risk management at the center of the framework.