The US Commodity Futures Trading Commission (CFTC) has released updated guidance on using tokenized collateral in derivatives markets, setting the stage for a pilot program to experiment with cryptocurrencies as collateral in these markets. In derivatives markets, collateral acts as a security deposit to assure that a trader can cover potential losses. Announced by CFTC Acting Chairman Caroline Pham, this digital asset pilot will enable futures commission merchants (FCMs)—companies that facilitate futures trades for clients—to accept Bitcoin (BTC), Ether (ETH), and Circle's stablecoin USDC (USDC) as margin collateral.
This pilot program marks a significant step toward integrating cryptocurrency into regulated financial markets. Circle CEO Heath Tarbert highlighted that it would enhance customer protection, reduce settlement friction, and assist in risk reduction. Pham emphasized that the program "establishes clear guardrails to protect customer assets and provides enhanced CFTC monitoring and reporting." Participating FCMs will adhere to stringent reporting standards, including weekly updates on total customer holdings and any significant issues affecting the use of crypto as collateral.
The CFTC’s Market Participants Division, Division of Market Oversight, and Division of Clearing and Risk have also provided updated guidance regarding the use of tokenized assets for collateral in futures and swaps trading. This guidance addresses tokenized real-world assets, such as US Treasury money market funds, and covers topics like eligible tokenized assets, legal enforceability, and segregation and control arrangements. Pham stated on X that this "guidance provides regulatory clarity and opens the door for more digital assets to be added as collateral by exchanges and brokers, alongside US Treasurys and money market funds."
Additionally, the Market Participants Division issued a "no-action position" concerning the use of payment stablecoins as customer margin collateral and the holding of specific proprietary payment stablecoins in segregated customer accounts. The CFTC also withdrew Staff Advisory 20-34, which had limited FCMs' ability to accept crypto as customer collateral, deeming it "outdated and no longer relevant," partly due to the GENIUS Act.
The CFTC's initiative has received commendations from several crypto industry leaders. Katherine Kirkpatrick Bos, general counsel at blockchain company StarkWare, remarked on the substantial impact of using "tokenized collateral in the derivatives markets." She noted the advantages such as atomic settlement, transparency, automation, and capital efficiency, recalling the tokenization summit in early 2024 as a hopeful sign.
Paul Grewal, Coinbase's chief legal officer, also endorsed the CFTC's move, describing Staff Advisory 20-34 as a "concrete ceiling on innovation" that relied on outdated information and overextended regulatory boundaries, hindering the objectives of the President's Working Group on Financial Markets (PWG).
Salman Banaei, general counsel at the layer-1 blockchain Plume Network, praised the CFTC's actions as a "major move" toward broader adoption. He noted that this development is a step toward using on-chain infrastructure to automate settlement for the world's largest asset class: over-the-counter derivatives and swaps.