CFTC’s Division of Clearing and Risk Issues Staff Advisory on the Risks Associated with Expansion of Derivatives Clearing Organization Clearing of Digital Assets

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The Commodity Futures Trading Commission Division of Clearing and Risk (DCR) issued a staff advisory on the risks associated with the expansion of Derivatives Clearing Organization (DCO) clearing of digital assets. In the past several years, DCR has observed increased interest by DCOs and DCO applicants in expanding the types of products cleared and business lines, clearing models, and services DCOs offer, including related to digital assets.

The advisory issued today, “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.”

Today’s staff advisory specifically notes that because of the increased 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.