CFTC Deepens Crypto Push With Approval of Derivatives Collateral

The Commodity Futures Trading Commission will allow Bitcoin, Ether, and the dollar-pegged stablecoin USDC to be used as collateral for derivatives trades, a decision that pushes crypto deeper into the plumbing of US finance.

The pilot project initiative, issued as a package of two staff advisories and a no-action letter sent to Coinbase Financial Markets Inc., applies to futures brokers, swap market participants and clearing houses. The collateral-related guidance also includes tokenized versions of US Treasuries and money-market funds, with clear requirements for asset segregation, reporting and surveillance.

“It’s encouraging to see a continued intentional focus on creating clear pathways for innovative developments in the US derivatives markets,” said Ryne Miller, a partner at Lowenstein Sandler.

Tokenized assets refer to digital representations of real-world assets or financial assets on the blockchain, a form of digital ledger. Although they don’t represent a direct claim on the asset itself, proponents say the process would deepen liquidity, support fractional asset ownership and potentially enable overseas investors to more easily gain access to US markets.

Last week, acting Chair Caroline Pham announced that CFTC-regulated exchanges could begin trading so-called spot crypto on derivatives exchanges. Typically, the agency can only regulate derivatives products, not their underlying assets, except in instances of fraud or manipulation.