CFTC issues digital asset clearing warning; agency member calls for rulemaking

The U.S. Commodities and Futures Trading Commission (CFTC) issued a warning about risks related to the clearing of digital assets on May 30.

Clearing risks

The relevant notice says that the CFTC’s Division of Clearing and Risk (DCR) has seen derivatives clearing organizations (DCOs) and applicants expand their offerings. Some of those offerings are related to digital assets, it said.

The DCR said that it is focused on “potentially heightened risks” related to those clearing activities and instructed DCOs to identify and manage said risks.

The division specifically mentioned cybersecurity requirements, conflict of interest, and the physical delivery of digital assets as areas of focus.

Commissioner urges for rulemaking

Although today’s notice simply provides details on the CFTC’s existing areas of regulation, one CFTC member has suggested it should lead to new rulemaking.

CFTC Commissioner Kristin Johnson said the current notice demonstrates that there is an “increasingly urgent need” for the CFTC to begin a rulemaking process around the risks connected to “crypto clearing activities.”

She warned that crypto-commodity derivatives clearing models could escape regulation unless the CFTC introduces parallel regulation similar to that in other markets. If such regulations are not applied, regular investors could be exposed to high-risk platforms with few customer protections, Johnson warned.

Though the CFTC could expand its authority over cryptocurrency, the agency has made it clear that it does not intend to regulate all crypto markets.

CFTC chairman Rostin Benham recently said that the CFTC intends to regulate cryptocurrency commodities as opposed to cash markets.

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