Important US agency CFTC takes important step regarding Bitcoin and Ethereum

Caroline Pham, acting chair of the U.S. Commodity Futures Trading Commission (CFTC), has taken a historic step toward expanding the use of digital assets in derivatives markets. FAM has announced a new digital asset collateral pilot program that allows digital assets such as BTC, ETH, and USDC to be used as collateral.

New regulatory guidelines regarding tokenized collateral under this program were published, repealing Staff Recommendation 20-34, which contained outdated regulations related to digital assets.

According to a statement from the CFTC, the move is a continuation of the Tokenization Collateral Initiative that Chairman Pham launched in September and is seen as a key part of President Trump’s strategy to integrate digital assets into the U.S. financial system.

Pham said in a press release that the CFTC aims to provide a safe alternative to offshore exchanges that have recently suffered losses in the cryptocurrency market, using the following statement:

“This year, the CFTC is leading the way in a golden age of innovation and cryptocurrencies in America. American citizens have the right to trade in secure U.S. markets, which is why last week I announced that spot crypto trading will be available on CFTC-registered exchanges.”

Pham said the new pilot program will strengthen the global leadership of the US financial market by introducing clear and strong control mechanisms for the use of Bitcoin, Ether and USDC as collateral.

Paul Grewal, Coinbase’s chief legal officer, called the decision “a much-needed validation” and said, “This decision confirms that stablecoins and digital assets enable faster, cheaper, and more secure payments.”

Jack MacDonald, Ripple’s senior vice president of stablecoins, said regulatory clarity will “improve capital efficiency and solidify America’s leadership in financial innovation.”

Chris Marszalek, CEO of Crypto.com, said the decision was “one of the moments that solidified our promise to make the United States the capital of cryptocurrencies,” adding that the CFTC’s formal recognition of tokenized collateral ushered in the era of 24/7 trading in the United States.

The CFTC’s new guidance covers the use of tokenized assets as collateral and provides clarity on:

• Which assets are suitable as tokenized collateral?
• Conditions of legal validity
• Storage, control and separation arrangements
• Valuation methods and collateral discounts (haircuts)
• operational risk

The guide also features real-world assets such as tokenized U.S. Treasuries and money market funds.

The CFTC’s Market Participant Division (MPD) also announced a “do nothing” position regarding certain obligations to securities firms known as futures commission merchants (FCMs). Accordingly:

• FCM can only accept collateral in BTC, ETH, and USDC for the first three months.
• During this period, a digital asset collateral report must be submitted weekly.
• The amount of digital assets held in customer accounts and any issues that arise will be immediately reported to the CFTC.

MPD has permanently repealed Staff Recommendation 20-34, issued in 2020, which restricted securities firms from accepting virtual currencies as collateral for their customers.

*This is not investment advice.

*This is not investment advice.