CFTC Risk Watchdog Has its Eye on Crypto

In an advisory issued Tuesday, the CFTC alerted all registered firms and applicants that the agency will be keeping a close eye on all new products and services related to cryptocurrencies. 

The CFTC’s Division of Clearing and Risk (DCR) has noticed an increase in registrants and applicants looking to get involved in new types of offerings, particularly with digital asset trading and clearing, the advisory said. 

Derivatives clearing organization “registrants and applicants should expect that DCR will be placing emphasis on the potential risks and DCO core principles related to system safeguards, physical settlement procedures, and conflicts of interest,” the advisory noted. 

The DCR is primarily concerned with “heightened” cyber and operational risks, as well as increased potential for conflicts of interest with crypto, the advisory added. Companies are responsible for identifying and evaluating potential dangers associated with all new activities, the regulator said. 

The DCR, which monitors finances and risks for all derivatives clearing organizations, last issued an advisory relating to cryptocurrencies in 2018. The advisory described guidelines for how registered exchanges and clearinghouses can compliantly list crypto assets. 

Tuesday’s advisory comes as lawmakers continue to spar over which regulatory agencies should take the lead in overseeing the digital asset space. 

Some congressional Democrats have pushed for granting the SEC the most power over crypto, as exemplified by a leaked House memo earlier this month. Other Democrats, namely Ritchie Torres from New York, and most Republicans opt for allowing the CFTC to oversee crypto commodity spot markets, including bitcoin and potentially ether, for now.

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