“US Regulators Address Compliance for Digital Asset Derivatives Clearing in Three Key Areas”

CFTC Warns Derivatives Clearing Organizations About Risks of Digital Assets

The United States Commodity Futures Trading Commission (CFTC) has issued a staff advisory letter to derivatives clearing organizations (DCOs) and applicants regarding the risks associated with expanding their activities, particularly with regards to digital assets. The CFTC’s Division of Clearing and Risk (DCR) stated that it expects DCOs and applicants to actively identify new and unique risks and implement relevant risk mitigation measures. Over the past several years, DCR has noticed increasing interest in expanding the types of products cleared, business lines, clearing models, and services offered by DCOs, including those involving digital assets.

In a staff advisory letter, the DCR emphasized compliance in three key areas: system safeguards, conflicts of interest, and physical deliveries. Safeguarding systems is necessary because of heightened operational and cyber risks related to digital assets. Potential conflicts of interest can arise from dependencies on affiliated entities or services. Physical delivery refers to the technical meaning of transferring ownership rights by transferring digital assets from one account or wallet to another.

Similar concerns echo the U.S. Securities and Exchange Commission’s recently reported plans to propose a new rule that would impact crypto firms serving as custodians of their clients’ assets and received harsh criticism from the crypto sector. Bitnomial, which has a DCO application before the CFTC, and LedgerX, a CFTC-regulated clearinghouse recently purchased by MIAX from FTX, were included in the staff advisory letter.

J-S Tremblay
About the author - J-S Tremblay

I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...

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