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    US Authorities to Address Climate Risks and Digital Asset Risks

    The Financial Stability Oversight Council (FSOC) released a report on digital asset financial stability risks and regulation as well as announced the establishment of the Climate-Related Financial Risk Advisory Committee (CFRAC), Moreover, the Federal Insurance Office (FIO) of the U.S. Department of Treasury proposed data collection from property and casualty (P&C) insurers to assess climate-related financial risks while the U.S. Treasury is also seeking comments on the digital-asset related illicit finance and national security risks as well as the publicly released action plan to mitigate these risks.

    Below are the key highlights of these recent updates:

    • The FSOC report on Digital Asset Financial Stability Risks and Regulation reviews financial stability risks and regulatory gaps posed by various types of digital assets and provides recommendations to address such risks. The recommendations include the consideration of regulatory principles, continued enforcement of the existing regulatory structure, steps to address each regulatory gap, and bolstering member agencies’ capacities related to crypto-asset data and expertise.
    • CFRAC, the newly established Committee on climate risk, is intended to help FSOC receive information and analysis on climate risks from a broad array of stakeholders. FSOC also named the initial members of CFRAC, which comprises stakeholders from the financial services industry, non-governmental research institutions, climate-related data and analytics providers, non-profit organizations, and academia.
    • The proposed data collection from P&C insurers will assist FIO in identifying and assessing the financial impact of weather-related events on insurers’ exposures and underwriting over time. The analysis would assess insurance availability, affordability, and its effects on policyholders, particularly in regions of the country with the potential for major disruptions of private insurance coverage due to climate-related disasters. The main elements of the proposed data collection focuses on insurer underwriting, insurance lines of business, insurers, data elements, reporting framework, reporting period, geographic granularity, geographic scope, and reinsurance impact. The proposed data collection would be aggregated at the ZIP Code level for a specific subset of insurers and would not involve data on individual homeowners or other insured entities. The comment period will be open for sixty days after the publication of the proposed notice in the Federal Register.
    • The US Treasury's request for comment on the digital-asset related illicit finance is aimed, among others, to better understand how public-private collaboration may improve efforts to address the risks related to illicit finance and further builds on the President Joe Biden’s Executive Order, “Ensuring Responsible Development of Digital Assets,” which was released on March 09, 2022, outlining the principal U.S. policy objectives with respect to digital assets. The comment period for this request ends on November 03, 2022.

     

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    Keywords: Americas, US, Banking, Insurance, Digital Assets, Regtech, ML TF Risk, Data Collection, Climate Change Risk, Reporting, CFRAC, FSOC, FIO, US Treasury, ESG

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