In an important and welcomed development in the digital asset space, the International Swaps and Derivatives Association (“ISDA”) has published new standard definitions for digital asset derivatives. Until now, there has been an absence of standardisation in the digital assets derivatives market with transactions often documented using highly bespoke agreements, including adapted ISDA-based documentation. However the spate of recent high profile insolvencies in the crypto market has highlighted the need for a move towards a standardised, robust and transparent set of trading documentation to support the further development and growth of this asset class. The introduction of the ISDA Digital Asset Derivatives Definitions (the “Digital Asset Definitions”) lay the foundations for this move.

The Digital Asset Definitions are designed for use by participants in privately negotiated transactions to document non-deliverable digital asset forwards and options referencing Bitcoin (BTC) or Ether (ETH) which are governed by the ISDA Master Agreement. Whilst initially covering non-deliverable forwards and options on Bitcoin and Ether, the Digital Asset Definitions have been drafted with future expansion to cover other derivative products and digital assets in mind as the market and technology evolve. In the meantime the Digital Asset Definitions will serve as a useful starting point for derivative transactions referencing other digital assets.

Appleby has recently been seeing growing interest in digital asset derivatives using Cayman Islands vehicles as trading counterparties. With the Cayman Islands being a “positive” netting jurisdiction, we believe ISDAs publication of the Digital Asset Definitions is a timely and positive development and brings a familiar framework to those more traditional financial institutions and derivatives users looking to enter the digital assets derivatives market.

Appleby is uniquely positioned to advise on digital asset derivatives with a leading team of offshore crypto and derivatives experts. Please get in touch to discuss how we can assist.

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