New CFTC Crypto Initiative: Bitcoin, Ethereum, To Serve As Collateral In Derivatives Trading
Caroline Pham, the performing chair of the US Commodity Futures Trading Commission (CFTC), has introduced the launch of a pilot program permitting Bitcoin (BTC), Ethereum (ETH), and USD Coin (USDC) to be utilized as collateral in US derivatives markets.
New CFTC Guidance For Crypto
The pilot program was unveiled on Monday, accompanied by new steering relating to the usage of tokenized collateral. The CFTC’s Market Participants Division, Division of Market Oversight, and Division of Clearing and Risk outlined their stance on tokenized belongings in at this time’s announcement, emphasizing that the company’s rules are technology-neutral.
Key matters coated within the steering embrace eligible tokenized belongings, authorized enforceability, custody preparations, valuation strategies, and operational dangers. The new directives additionally embody tokenized real-world assets (RWAs), like US Treasury securities and cash market funds.
In a transfer designed to supply regulatory readability, the CFTC issued a no-action place relating to sure necessities for Futures Commission Merchants (FCMs) that settle for non-securities crypto belongings as buyer margin collateral or that maintain stablecoins in segregated accounts.
This place goals to advertise a clearer understanding of the applying of segregation and capital necessities for FCMs integrating digital belongings into their operations.
CFTC Withdraws Outdated Advisory
Under this pilot program, FCMs will probably be permitted to simply accept BTC, ETH, and USDC as margin collateral for an preliminary three-month interval. During this time, the companies should present weekly reports on the quantity of digital belongings held in buyer accounts, detailing every asset sort.
Additionally, they’re required to tell CFTC employees of any vital points that come up regarding the usage of these digital belongings as collateral.
The CFTC has additionally withdrawn Staff Advisory No. 20-34, which beforehand restricted FCMs from accepting cryptocurrencies as buyer collateral.
The assertion asserts that the advisory had change into outdated as a result of substantial developments within the digital asset panorama and the enactment of the GENIUS Act, making it not related. Acting Chair Pham emphasised the significance of those modifications, stating:
Under my management this yr, the CFTC has led the best way ahead into America’s Golden Age of Innovation and Crypto. This crucial has by no means been extra essential given current buyer losses on non-U.S. crypto exchanges. Americans deserve secure U.S. markets as an alternative choice to offshore platforms.”
Pham added that the initiative to permit spot crypto buying and selling on CFTC-registered exchanges and the institution of a digital belongings pilot program set clear guardrails for shielding buyer belongings, whereas enhancing the monitoring and reporting capabilities of the CFTC.
Through these initiatives, Pham goals to supply regulatory readability for tokenized collateral associated to real-world belongings and reply to the wants of the broader cryptocurrency market.
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