The US Commodity Futures Trading Commission has released additional guidance outlining its expectations for the use of cryptocurrency as collateral in derivatives markets. The clarification came through a notice published Friday by the agency’s Market Participants Division and Division of Clearing and Risk. The notice responded to frequently asked questions that arose following two staff letters issued in December, which established the framework for the pilot program.
Futures commission merchants wishing to participate in the pilot must file a notice with the Market Participants Division that includes the date on which they plan to begin accepting crypto assets from customers as margin collateral. The December guidance had already clarified which tokenized assets are eligible for use as collateral, how those assets should be valued, and how much collateral is required for a given trading position. The crypto industry has long maintained that blockchain technology is well suited to round-the-clock trading and near-instant settlement.
The CFTC stated that its guidance is intended to align with that of the Securities and Exchange Commission, as the two agencies continue to develop a joint regulatory framework for digital assets. On the matter of capital charges — the amounts that must be held in reserve to cover potential losses — the CFTC said its approach would be consistent with the SEC’s. Specifically, futures commission merchants are required to apply a 20% capital charge for positions in Bitcoin and Ether, while stablecoins carry a lower charge of 2%.
During the first three months of the pilot, participating futures commission merchants may only accept Bitcoin, Ether, or stablecoins as collateral. They are also required to provide prompt notification of any significant cybersecurity or system issues and must submit weekly reports detailing the total amount of crypto held across all customer account types. These initial restrictions are designed to allow regulators to monitor the program closely before expanding its scope.
After the three-month introductory period concludes, other cryptocurrencies may be accepted as collateral, and the weekly reporting requirements will no longer apply. The notice also specified that only proprietary payment stablecoins may be deposited as residual interest in customer segregated accounts, and futures commission merchants are prohibited from accepting other cryptocurrencies for that purpose. This distinction underscores the regulatory boundaries the CFTC is drawing around different categories of digital assets.
The CFTC further clarified that crypto assets and stablecoins cannot be used as collateral for uncleared swaps. However, swap dealers are permitted to use tokenized versions of an eligible asset, provided the tokenized form meets existing regulatory requirements and grants the holder the same rights as the asset in its traditional form. Derivatives clearing organizations, meanwhile, may accept crypto and stablecoins as initial margin for cleared transactions if those assets satisfy CFTC standards related to credit, market, and liquidity risks.
Originally reported by CoinTelegraph.
