Abstract：US Regulator Issues Warning for Firms Providing Clearings Services for Crypto
A US regulator warned firms on Tuesday of the risks that come with the clearing of digital assets.
The US Commodity Futures Trading Commission issued an advisory titled, “Review of Risks Associated with Expansion of DCO Clearing of Digital Assets.”
Derivative clearing organizations, or DCOs, are registered with the CFTC and provide clearing services for products such as futures contracts, options or swaps.
The regulator said it had “observed increased interest by DCOs and DCO applicants in expanding the types of products cleared and business lines, clearing models, and services offered by DCOs, including related to digital assets.”
The agency specifically notes risks, including cyber, that can be associated with digital assets.
For DCOs that involve the “physical delivery of digital assets,” the regulator said its staff “will emphasize reviews of physical settlement arrangements, including whether DCOs have adequately identified and managed risks and obligations associated with digital assets and whether DCO rules clearly state the obligations of the DCO, if any, with respect to physical deliveries involving digital assets.”
DCOs and digital assets
The CFTC granted LedgerX a DCO license in 2017, which allows it to clear futures, options on futures and swaps.
FTX US acquired LedgerX in 2021, but after its demise sold it to an affiliate of Miami International Holdings in April.
FTX CEO John J. Ray lll, has said LedgerX was operated “on a generally independent basis” from FTX, according to court filings.
“My understanding is that LedgerX maintains segregated customer accounts as well as its own books and records in accordance with applicable CFTC regulations,” Ray said.
Separately, the CFTC has been active in going after firms and individuals in crypto space who they believe violate its rules.
The regulators charged crypto exchange Binance and its founder, Changpeng Zhao, in March over offering unregistered crypto derivative trading products in the US.
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