US derivatives regulator, the Commodities Futures Trading Commission (CFTC), has warned Derivatives Clearing Organizations (DCOs) against the risk involved in the expansion of their clearing services into digital assets. DCOs are firms that match and settle derivatives contracts based on underlying assets such as stocks, bonds or currency.

"In the past several years, [CFTC] Division of Clearing and Risk (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 derivatives watchdog warned in a staff advisory published on its website on Tuesday.

CFTC Raises Alarm on Increasing Cyber Threat

In the statement, CFTC emphasized that its DRC would remain focused on the potentially heightened risks associated with certain clearing activities even as registrants and applicants are expanding into new lines of business, changing business models, or offering new and novel products.

"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," CFTC said.

According to the announcement, the staff advisory is in light of the increase in cyber security and other risks related to digital assets.

"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," the derivatives watchdog explained.

CFTC Heightens Scrutiny across Industries

Meanwhile, CFTC sued 14 retail FX dealers in April for allegedly fraudulently claiming to be registered with the agency. Additionally, the accused entities, which include Trade FX, Bit Block FXtrades, Bit Trading, and Bitfinmarket.com, were charged by the regulator for claiming to be members of the National Futures Association (NFA).

CFTC is not sparing the big players either in its efforts to sanitize the industry under its purview. Most recently, the commission fined the HSBC Bank USA $45 million for ‘manipulative and deceptive trading.’ The agency also accused the lender of failing to maintain a record of its business calls.

In the cryptocurrency space, CFTC in March sued Binance, the top crypto exchange by trading volume, for allegedly breaching the Commodity Exchange Act (CEA) and the CFTC regulations. Under the case, Binance’s Founder, Changpeng Zhao, is also facing scrutiny.