What is the Mechanism of Resolution Planning?

The mechanism involves creating detailed "living wills" that outline how critical functions, such as customer asset segregation, data integrity, and operational continuity, would be maintained or transferred during a failure event. This includes identifying core business lines, mapping interconnections with other entities, and pre-positioning resources. For crypto, this might involve specifying procedures for secure asset transfers on-chain or off-chain.

What is the Methodology of Resolution Planning?

The methodology for Resolution Planning draws from established frameworks in traditional finance, adapting them to the unique characteristics of digital assets and decentralized networks. It employs stress testing, scenario analysis, and regular updates to plans based on market developments and regulatory changes. The strategic objective is to minimize the economic and social costs of institutional failures in the crypto space, ensuring financial stability and investor confidence even in extreme adverse events.

Resolution Planning

Meaning

Resolution Planning, in the context of the crypto financial system, refers to the proactive development of strategies and procedures by regulated digital asset institutions and supervisory authorities to manage an orderly wind-down of a failing entity without causing systemic disruption. This is particularly relevant for large crypto exchanges, stablecoin issuers, or DeFi protocols deemed systemically important. Its purpose is to mitigate contagion risk and protect market participants during distress.

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▴Resolution Planning

▴Financial Stability Board

▴ISDA Resolution Stay Protocol

Can Regulatory Stays on Cross-Default Enforcement during a Resolution Process Prevent a Systemic Crisis?

Regulatory stays on cross-defaults function as critical circuit breakers, converting a chaotic contagion cascade into a managed resolution process.

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▴Operational Continuity

▴Bridge Bank

▴FSB

How Do Regulators Ensure That a Bank’s Critical Functions Can Continue during a Resolution?

Regulators ensure a bank's critical functions continue by executing pre-planned strategies that isolate failure and recapitalize operations.

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▴Capital Requirements

▴Derivatives Market

▴Pricing Models

How Does Sifi Designation Affect a Bank’s Business Model and Competitiveness in Derivatives?

SIFI designation recasts a bank's architecture, trading higher capital costs for systemic stability and altering derivatives competitiveness.

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▴Derivatives Clearing

▴Financial Institutions

▴Resolution Planning

Could the Failure of a Single Central Counterparty Trigger a Wider Global Financial Crisis?

The failure of a single central counterparty could trigger a global financial crisis by concentrating and then amplifying systemic risk.

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▴Clearing House

▴Default Fund Contribution

▴Systemic Risk

What Are the Long-Term Consequences of Risk Concentration in Central Counterparties for Financial Stability?

Risk concentration in CCPs transforms diffuse counterparty risks into a singular, systemic vulnerability requiring robust, resilient frameworks.

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Resolution Planning

Meaning

Mechanism

Methodology

Can Regulatory Stays on Cross-Default Enforcement during a Resolution Process Prevent a Systemic Crisis?

How Do Regulators Ensure That a Bank’s Critical Functions Can Continue during a Resolution?

How Does Sifi Designation Affect a Bank’s Business Model and Competitiveness in Derivatives?

Could the Failure of a Single Central Counterparty Trigger a Wider Global Financial Crisis?

What Are the Long-Term Consequences of Risk Concentration in Central Counterparties for Financial Stability?

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