The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk issued a staff advisory this week on the risks related to the clearing of digital assets.
Specifically, staff at the Division of Clearing and Risk (DCR) issued an advisory on the risks associated with the expansion of Derivatives Clearing Organization (DCO) clearing of digital assets.
DCR has observed, In the past several years, that there has been increased interest by DCOs and DCO applicants in expanding the types of products cleared and business lines, including those related to digital assets.
The DCR advisory “reminds registrants and applicants that when expanding lines of business, changing business models, or offering new and novel products, DCR will remain focused on the potentially heightened risks that may be associated with certain of those clearing activities. DCR expects DCOs and applicants to actively identify new, evolving, or unique risks and implement risk mitigation measures tailored to the risks that these products or clearing-structure changes may present.”
In addition, the staff advisory specifically notes that due to the rise in cyber and other risks that may be associated with digital assets, DCR will emphasize DCO applicant and registrant compliance with the DCO Core principles related to system safeguards, conflicts of interest, and physical delivery.