Abstract
We propose a method to assess the counterparty risk of non-banking financial institutions that operate as fiat-crypto gateways in blockchain and distributed ledger technology financial infrastructures. The risk scores are suitable to evaluate both traditional money services businesses and fintech companies (including cryptocurrency payments and blockchain systems operators). The main users are banks, investors, and, businesses that need to assess counterparty risk across jurisdictions and under uncertainty, as non-banks are often less regulated than other financial institutions. We follow an automation-focused, multidisciplinary approach rooted in established techniques from network science and genetic programming, as well as in the emerging fields of machine behavior and trustworthy artificial intelligence. The method and findings pertain to any decentralized financial infrastructure with centralized components such as fiat on/off ramps, where counterparty risk assessment becomes a necessity for regulatory, investment, and, operational purposes. The method is demonstrated on a network of Ripple payment gateways.
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Venegas, P. (2021). Trustable Risk Scoring for Non-bank Gateways in Blockchain and DLT Financial Networks. In: Braha, D., et al. Unifying Themes in Complex Systems X. ICCS 2020. Springer Proceedings in Complexity. Springer, Cham. https://doi.org/10.1007/978-3-030-67318-5_10
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DOI: https://doi.org/10.1007/978-3-030-67318-5_10
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