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ISDA will bring together derivatives market participants, members of the crypto-asset community and other stakeholders to help develop common legal standards and definitions for digital asset derivatives, recognizing that crypto assets are a unique product class. This paper (i) identifies novel technology and market-driven events that could disrupt the operation of a digital asset derivatives transaction and provides a framework for dealing with these events; (ii) explores how digital assets (and the derivatives that reference them) can be valued and what happens when a valuation cannot be obtained; and (iii) analyzes how digital assets might interact with the existing ISDA documentation architecture, including the ISDA Master Agreement and industry standard collateral documentation. ISDA has also produced a supplement to the paper that sets out a granular, technical analysis of different ISDA product definitions and their potential applicability to digital asset derivatives.

The International Swaps and Derivatives Association (ISDA) published new standard digital assets derivatives definitions and documentation, to create an unambiguous contractual framework under the ISDA Master Agreement umbrella. The definitions initially cover non-deliverable forwards and options on Bitcoin and Ether, but could be expanded cover other distributed ledger technology (DLT) based digital assets. The definitions have been drafted to facilitate Common Domain Model integration and automation within smart contracts.

The International Swaps and Derivatives Association (ISDA) published four new whitepapers that analyze the legal issues associated with using smart derivatives contracts on distributed ledger technology (DLT). The four papers consider these issues from a French, Irish, Japanese and New York law perspective. An earlier paper published in January explored the topic from the perspective of English and Singaporean law. The analysis concludes that it is unlikely a local court would reject an express choice of law by the contracting parties, whether under ISDA documentation or in any other agreement between the parties and a platform provider. The papers also highlight potential challenges in identifying the precise location of digital assets, which could lead to uncertainty over which jurisdiction's laws would apply.

The International Swaps and Derivatives Association (ISDA) published a jurisdiction-agnostic guidance note to inform how counsel may approach a legal opinion on the enforceability of collateral arrangements entered into under certain ISDA collateral documentation where the relevant collateral arrangement comprises tokenized securities and/or stablecoins. This guidance note sets forth (i) a basic taxonomy of common tokenization structures and (ii) a non-exhaustive list of key issues to consider when analyzing the enforceability of collateral arrangements involving tokenized collateral.

ISDA CEO Scott O'Malia has written a new derivatiViews blog on the 2021 ISDA Interest Rate Derivatives Definitions, which were implemented this week.

The International Swaps and Derivatives Association (ISDA) has established a new digital asset legal and documentation working group. As it stands, institutions trading digital asset derivatives typically use an amended version of existing ISDA definitions and templates or entirely bespoke documentation they've developed internally. That's not ideal: it results in a lack of standardization that may ultimately hamper transparency and liquidity and lead to higher levels of risk. The new working group will focus on developing specific legal standards for crypto derivatives, in the same way there is for interest rate, FX, equity, credit and commodity derivatives.

"ISDA is now working to develop legal standards to support the crypto derivatives market, with input from a range of stakeholders, including those active in the crypto space. The aim is to align the crypto derivatives market with the existing spot market by creating strong legal foundations. Last year, we established the ISDA Digital Assets Legal Group and, in December, we published a paper that explores the key issues that need to be addressed in any contractual standards for OTC derivatives, including disruption events, valuation and documentation."

The International Swaps and Derivatives Association (ISDA) is collaborating with the digital asset industry to establish contractual standards for crypto derivatives. In a DerivSource Q&A, Mark New, senior counsel, Americas at ISDA, discusses what the forthcoming standards will look like, how they will cope with digital asset-specific events such as forks and airdrops and what to expect next from the trade association.

ISDA analysis indicates that netting arrangements relating to digital asset derivatives are likely to be enforceable in certain major jurisdictions (including England and Wales and New York). However, the enforceability of netting in each jurisdiction will depend on the counterparty's local insolvency law, some of which may exclude or omit digital assets from their scope of application. ISDA will therefore begin work in 2023 to update netting opinions in relevant jurisdictions to cover digital assets. When it comes to collateral, it is likely that most (if not all) developed jurisdictions will recognize digital assets as property that will be capable of protection under local law, including for posting as collateral. However, the precise nature and extent of any rights associated with that property interest, the strength of legal certainty and certain technical issues, such as the methods by which that property can be posted as enforceable collateral, will vary based on the applicable jurisdiction(s).

"ISDA has published its latest annual margin survey, which shows a substantial increase in the amount of initial margin (IM) and variation margin (VM) collected by the 20 largest market participants for their non-cleared derivatives trades last year."

ISDA, Clifford Chance, R3 and the Singapore Academy of Law have published a new whitepaper that provides analysis on the legal issues relating to the use of smart derivatives contracts on distributed ledger technology (DLT).

The International Swaps and Derivatives Association (ISDA) and the International Securities Lending Association (ISLA) have agreed to closely collaborate on two key initiatives to deliver digital solutions to their respective memberships in a consistent and cost-effective way. As part of the agreement, ISLA will also work to model and code specific SFT components for inclusion in the CDM, creating greater alignment between derivatives and securities lending markets. The CDM establishes a single, common digital representation of events and processes that occur during the lifecycle of a trade, and is aimed at enhancing consistency and facilitating interoperability across firms and platforms.

The International Swaps and Derivatives Association (ISDA) announced a pilot implementation of the Common Domain Model (CDM) for the clearing of interest rate derivatives using DAML, an open-source smart contract language created by Digital Asset. Using the CDM for clearing and deploying it on a distributed ledger with DAML will remove the burden of setting up connections to incongruous systems and services, facilitating interoperability, automation and straight-through processing. This pilot takes the CDM model for clearing and adds new features for the signing of state transitions, data ownership and privacy elements, which are necessary to put the CDM clearing model into production.

The International Swaps and Derivatives Association (ISDA) has updated an annex to its master derivatives agreement to support the use of tokenized collateral. The Tokenized Collateral Model Provisions do not purport, and should not be considered, to address all issues and considerations that may be relevant in connection to the transfer or receipt of Tokenized Collateral, including, without limitation, enforceability, regulatory, tax and accounting issues and considerations.

Digital Asset is collaborating with ISDA to develop a new tool that can support the use of smart contracts for derivatives trading. The collaboration focuses on creating interoperable technical solutions that advance standardization to allow for greater automation of derivatives trade management.

ISDA also published a whitepaper that addresses some of the derivatives-related legal issues raised by the recent bankruptcies of major crypto exchanges and market participants. It focuses on the importance of close-out netting and collateral arrangements for derivatives referencing digital assets and identifies several areas of focus for policymakers and market participants to ensure greater certainty. This includes use of standardized contractual frameworks and further legal clarity from national authorities on the property status of digital assets.

The International Swaps and Derivatives Association (ISDA) published the results of a study that demonstrates that hedging the most liquid crypto assets for which there is a two-way market, so-called Group 2a crypto assets (Bitcoin and Ether), with their respective futures or exchange-traded funds (ETFs), is effective. The paper also shows that the basis risk profile of Group 2a crypto-asset futures is comparable with that of existing financial assets. The capital treatment should therefore allow for offsetting for Group 2a crypto-assets and their futures and ETFs.

This paper investigates the extent to which terms of, and workflow around, the provisions of ISDA Master Agreements can be automated via smart contracts.

ISDA has published the sixth in a series of legal guidelines for smart derivatives contracts. These guidelines provide high level background on the CDS market; identify opportunities for the potential application of smart contract technology to CDS; and highlight important issues for technology developers to consider when designing technology-enabled solutions for trading and processing CDS and associated processes. These guidelines also highlight areas where further industry collaboration will be required to identify existing areas of legal and regulatory uncertainty and to develop solutions.

This paper by Vipin Bharathan and Mani Pillai proposes a CBDC implementation approach based on two reference standards; the Token Taxonomy Framework (TTF) for tokens and the International Swaps and Derivatives Association (ISDA) Common Domain Model (CDM) for contracts. The proposal's basic pattern is a contract network linked to a token network, bridging the gap between business contracts and the corresponding exchange of value.