Sunday, July 21, 2024

US Regulator Issues Strict Warning for Firms Providing Clearings Services for Crypto.

On Tuesday, a US regulator warned businesses about the dangers of clearing digital assets. The warning titled “Review of Risks Associated with Expansion of DCO Clearing of Digital Assets” was published by the US Commodity Futures Trading Commission as a cautionary statement.

The CFTC has registered derivatives clearing organizations, or DCOs, offering clearing services for futures contracts, options, or swaps.

The regulatory authority announced that it has noticed a growing interest among derivative clearing organizations (DCOs) and DCO applicants in expanding the range of cleared products, business lines, clearing models, and services offered, particularly in relation to digital assets.

The organization particularly mentions risks, such as cyber ones, that can be connected to digital assets.

Regarding derivative clearing organizations (DCOs) that involve the “physical delivery of digital assets,” the regulatory body expressed that its personnel will prioritize assessments of the arrangements for physical settlement. This includes evaluating whether DCOs have appropriately recognized and handled the risks and responsibilities related to digital assets. Additionally, the regulator will examine whether the rules of the DCOs explicitly outline any obligations concerning physical deliveries that involve digital assets.

Digital currency and assets

LedgerX was given a DCO license by the CFTC in 2017, enabling it to clear futures, options on futures, and swaps.
LedgerX was purchased by FTX US in 2021; however, following its demise, it was sold to a Miami International Holdings affiliate in April.

According to court documents, LedgerX was run “on a generally independent basis” from FTX, according to FTX CEO John J. Ray lll.

In compliance with the relevant CFTC laws, Ray added, “My understanding is that LedgerX maintains segregated customer accounts as well as its own books and records.”

Separately, the CFTC has aggressively taken legal action against companies and people they believe are breaking its laws in the cryptocurrency industry.

In March, the regulators filed charges against Binance, a cryptocurrency exchange, and Changpeng Zhao, its creator, for providing unregistered crypto derivative trading products in the US.

Cryptured Team
Cryptured Team
The writers team at Cryptured.com is composed of passionate and experienced journalists who cover the latest developments in the crypto and blockchain space. They aim to provide accurate, unbiased and easy-to-understand news and information for their readers, as well as insights and analysis from industry experts. The writers team is always on the lookout for new and exciting stories that can help the general public learn more about the potential and challenges of these technologies.
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