Staff at the U.S. Commodity Futures Trading Commission warn companies about the risks of clearing digital assets transactions and urge them to actively mitigate those risks. Commissioner Kristin Johnston said that this advisory should be turned into a full blown rule-writing initiative.

The CFTC Division of Clearing and Risk issued the advisory Tuesday. It said it would focus on emerging risks in cryptocurrency in response to a rise in the number of its supervised entities clearing these trades. The risks include possible conflicts of interest and protections against cyber-threats, as well as how firms manage physical delivery of digital asset in transactions that require delivery.

The agency expects that companies “actively identify new, evolving or unique risks, and implement risk-mitigation measures tailored to those risks.”

The statement of the CFTC was followed by a statement from Kristin. She called on the CFTC for a formal procedure to establish new rules.

In a statement released on Tuesday, she stated that “we observe an increased registration activity for cryptocurrency derivatives clearing” and noted that some models adopted a non intermediated market structure. “Unless we implement parallel regulation, crypto-commodity clearing models may be not subject to the most stringent regulatory standards,” she said in a Tuesday statement.

LedgerX , a former FTX.US affiliate, is one of the crypto firms that have joined the derivatives clearing organization overseen by this agency. LedgerX’s attempt to establish direct crypto clearing, without go-between companies – famously pushed forward by former FTX CEO Sam Bankman Fried – was abandoned but opened up a controversy that remains unresolved.

Johnson argued the CFTC’s new advisory highlights the need for more – “a rulemaking procedure to explore the challenges of introducing protections for customers in non-intermediated cryptocurrency markets.”

When a regulator like the CFTC issues a public warning about certain activities as it did on Tuesday, sanctions are often imposed in that area. The CFTC is already pursuing enforcement actions against crypto firms, including a recently taken action against Binance’s global operations.

The derivatives regulator has direct control over crypto futures, and can also enforce against fraud and manipulation on spot markets when trading non-security crypto assets. The derivatives regulator is expected to play a larger role in the future as an industry watchdog. However, bills that would increase its authority have not yet been passed through Congress.

Read more: DeFi will be under the microscope at US CFTC Advisory Group’s Opening Session

UPDATE: May 30, 2023 at 20:43 (UTC): Adds CFTC Commissioner Johnson’s proposal to engage in rulemaking.

Nikhilesh De.