Since 2016 regulatory changes in the EU came into effect, completing the G-20 CDS contingency reform. It mandates CDS holders to share the risk in a systemic event (financial crisis) scenario. As CDS are insurances intended to mitigate risks (which have the tendency to manifest during systemic events), the said change of the legislation in not universally popular with derivative holders.
This has caused dramatic drop in the CDS market. While in 2007 there were around $62 trillion worth of CDS (over 53% of the global core debt) a decade later the figure stands at less than $10 trillion (6% of the global core debt). The ambiguity of the CDS harms not only the insurers that lose business, but also the economy at large, as risks are suboptimally distributed.
Should the Insurer be deemed troubled (as having taken too much risk) the CDS contract becomes legally unenforceable, which releases the Insurer from the obligation to transfer the collateral (or make the payment) to the CDS holder. Out token is different from all other assets classes (money, bonds, shares, etc.) as it moves itself. Should the CDS contract get triggered the collateral will automatically transfer making contract unenforceability inconsequential.
A number of unique features make Deriveum exceptional and exclusively suited for the task. The two standing out are transparency and lower price volatility. Each user will be required to identify him/herself with government issued e-signature, complying with KYC and AML legislation. The Price Stabilization Mechanism (PSM) is an automated trading algorithm that will be uploaded with tokens and money and will sell and buy tokens at pre-determined support levels, ensuring liquidity and low price volatility. Half of the proceeds from token sales will go to the PSM.