CFTC Advances Crypto Collateral in Derivatives Markets

By: crypto insight|2025/12/09 17:30:13

Key Takeaways

The CFTC has unveiled a pilot program that allows futures commission merchants to accept Bitcoin, Ether, and USDC for margin collateral in derivatives markets, emphasizing strict reporting requirements.
Updated guidelines from the CFTC support the integration of tokenized assets, including US Treasury equivalents, as collateral in futures and swaps markets.
The initiative is celebrated by industry leaders as a significant step towards wider adoption of cryptocurrencies and on-chain settlement processes.
The move aligns with broader trends towards regulatory clarity and modernization, enhancing security and innovation in digital asset markets.

WEEX Crypto News, 2025-12-09 09:15:05

The Landscape of Crypto as Collateral in Derivatives

In a significant stride towards integrating digital assets with mainstream finance, the US Commodity Futures Trading Commission (CFTC) has initiated a pilot program to explore the use of cryptocurrencies as collateral in derivatives markets. This program comes as part of an effort to modernize and adapt regulatory frameworks to the rapidly evolving landscape of digital assets and blockchain technology.

Collateral within derivatives markets functions as a form of security deposit, providing assurance that a trader can withstand any potential financial losses. Traditionally, this collateral has taken the form of cash or government securities. However, with the advent of cryptocurrencies, there’s a growing interest in leveraging their liquidity and value as an alternative form of collateral.

The CFTC’s New Pilot Program

Under the leadership of CFTC acting chairman Caroline Pham, this groundbreaking program permits futures commission merchants (FCMs) to accept Bitcoin (BTC), Ethereum (ETH), and Circle’s stablecoin USDC as margin collateral. This move represents a deliberate push to incorporate digital assets into regulated financial markets. Heath Tarbert, CEO of Circle, highlighted the benefits of this approach, noting how it could protect customers, lower settlement friction, and mitigate risks.

Pham’s statements emphasized the program’s role in establishing robust guidelines to safeguard customer assets while providing rigorous monitoring and reporting by the CFTC. Participants in the pilot must adhere to strict reporting protocols, including weekly disclosures on total customer holdings and any incidents impacting the use of these cryptocurrencies as collateral.

Enhanced Guidelines for Tokenized Assets

In addition to the pilot program, the CFTC’s Market Participants Division, along with its Division of Market Oversight and Division of Clearing and Risk, released updated guidance concerning the use of tokenized assets in futures and swaps trading. This guidance expands the types of tokenized assets that are eligible for use as collateral, such as tokenized versions of money market funds and certain real-world assets like US Treasury securities.

This regulatory guidance aims to provide the necessary clarity to facilitate broader acceptance of digital and tokenized assets by exchanges and market brokers. It also covers important considerations like legal enforceability and the arrangements required for segregation and control of these assets. In her announcement, Pham stated that the revised guidance removes outdated restrictions and paves the way for including more digital assets as regulatory-approved collateral.

Reaction from the Crypto Community

The CFTC’s measures have garnered positive feedback from various corners of the cryptocurrency industry. Katherine Kirkpatrick Bos, general counsel at StarkWare, praised the initiative, describing the use of tokenized collateral in derivatives markets as transformative. She noted that this could revolutionize trading by enhancing efficiency through automation, transparent processes, and cost savings.

Similarly, Coinbase’s chief legal officer, Paul Grewal, welcomed the removal of the previous Staff Advisory 20-34, which had imposed limits on FCMs accepting cryptocurrencies as collateral. Grewal viewed the removal of this advisory as a necessary step towards fostering innovation, arguing that the old regulations were based on outdated information and unnecessarily hindered progress.

Salman Banaei, general counsel at Plume Network, underscored the significance of this move in pushing towards broader crypto adoption. He highlighted the potential for using on-chain infrastructure to automate settlements for over-the-counter derivatives, a move seen as crucial for the evolution of the world’s largest asset class.

Broader Implications for the Crypto and Financial Sectors

The CFTC’s decision reflects a broader trend towards digital transformation within financial markets. As regulatory bodies adapt to include digital assets, two primary benefits are being realized: greater liquidity and potentially increased market participation. By acknowledging digital assets, regulators like the CFTC are aligning with global financial trends, which increasingly see cryptocurrencies as viable components of mainstream financial ecosystems.

This pilot program is part of a larger narrative where traditional financial institutions are gradually opening up to digital assets. The framework provided by initiatives like these helps dispel uncertainties that have long surrounded the crypto space, breaking down barriers to entry for institutions and retail investors alike.

Furthermore, the move demonstrates the CFTC’s commitment to fostering innovation while ensuring market integrity and protecting investors. It also positions the U.S. as a leader in the global financial ecosystem, which is slowly pivoting towards a more decentralized and tokenized future.

The Future Outlook for Crypto Collateral

As the pilot unfolds, its real-world implications will provide valuable insights into how digital assets can be practically utilized within the realm of derivatives. This initiative may set a precedent not only in the United States but globally, as other markets observe and adapt to similar changes in regulatory frameworks.

It is anticipated that successful integration of cryptocurrencies as collateral could encourage additional regulatory bodies to re-evaluate their own positions on digital assets, promoting even broader acceptance.

Moreover, by taking these steps, the CFTC also indirectly addresses common concerns about the volatility and security of digital assets by implementing strict reporting guidelines and protective measures. The pilot thus acts as both a testing ground and a protective barrier, ensuring that any systemic risks are appropriately managed.

Conclusion

The introduction of cryptocurrencies as collateral in derivative markets symbolizes a crucial juncture for both the financial and cryptocurrency sectors. This CFTC-led pilot not only seeks to leverage the liquidity, transparency, and efficiency of digital assets but also sets a framework that could influence future financial regulations.

As this pilot progresses, it will likely uncover additional opportunities and challenges associated with the integration of crypto assets into well-established financial systems. Stakeholders from across the financial spectrum will closely monitor these developments, which promise to redefine the nature of collateral usage and potentially broaden the horizons of financial innovation.

By continuing to foster an ecosystem that embraces innovation while maintaining rigorous oversight, the CFTC offers an essential model for balanced regulation. Such progress signals the beginning of a new era where digital assets play a more central role in world finance, reflecting a shift towards a more inclusive and decentralized financial future. With global financial landscapes on the cusp of transformation, the CFTC’s pilot program stands as a pivotal moment in the next wave of financial evolution.

FAQs

What is the CFTC’s new pilot program about?

The CFTC’s new pilot program allows futures commission merchants to accept Bitcoin, Ether, and USDC as collateral in derivatives markets, under strict reporting and monitoring guidelines. This initiative aims to integrate digital assets into regulated financial markets more effectively.

How does collateral work in derivatives markets?

In derivatives markets, collateral acts as a security deposit to ensure that traders can meet potential losses. By accepting digital assets like cryptocurrencies, markets might enjoy enhanced liquidity and flexibility.

Why are the CFTC’s updated guidelines significant?

The guidelines facilitate the use of tokenized assets as collateral, expanding the scope for digital assets beyond traditional securities. They aim to provide clarity and legal enforceability, fostering broader adoption.

What reactions have industry leaders shown towards the CFTC’s move?

Industry leaders have positively received the CFTC’s move, seeing it as a facilitator of innovation and a step towards more efficient and automated settlement processes in financial markets.

What could be the broader implications of this program?

This program may lead other regulatory bodies to consider similar frameworks, potentially making digital assets more mainstream in financial markets globally and enhancing the transparency and efficiency of financial transactions.

Foreword: Today, the People's Bank of China's website published the "Notice of the People's Bank of China, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration for Market Regulation, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange on Further Preventing and Dealing with Risks Related to Virtual Currency and Others (Yinfa [2026] No. 42)", the latest regulatory requirements from the eight departments including the central bank, which are basically consistent with the regulatory requirements of recent years. The main focus of the regulation is on speculative activities such as virtual currency trading, exchanges, ICOs, overseas platform services, and this time, regulatory oversight of RWA has been added, explicitly prohibiting RWA tokenization, stablecoins (especially those pegged to the RMB). The following is the full text:

To the people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government, the Xinjiang Production and Construction Corps:

Recently, there have been speculative activities related to virtual currency and Real-World Assets (RWA) tokenization, disrupting the economic and financial order and jeopardizing the property security of the people. In order to further prevent and address the risks related to virtual currency and Real-World Assets tokenization, effectively safeguard national security and social stability, in accordance with the "Law of the People's Republic of China on the People's Bank of China," "Law of the People's Republic of China on Commercial Banks," "Securities Law of the People's Republic of China," "Law of the People's Republic of China on Securities Investment Funds," "Law of the People's Republic of China on Futures and Derivatives," "Cybersecurity Law of the People's Republic of China," "Regulations of the People's Republic of China on the Administration of Renminbi," "Regulations on Prevention and Disposal of Illegal Fundraising," "Regulations of the People's Republic of China on Foreign Exchange Administration," "Telecommunications Regulations of the People's Republic of China," and other provisions, after reaching consensus with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, and with the approval of the State Council, the relevant matters are notified as follows:

I. Clarify the essential attributes of virtual currency, Real-World Assets tokenization, and related business activities

(I) Virtual currency does not possess the legal status equivalent to fiat currency. Virtual currencies such as Bitcoin, Ether, Tether, etc., have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed ledger or similar technology, existing in digital form, etc. They do not have legal tender status, should not and cannot be circulated and used as currency in the market.

The business activities related to virtual currency are classified as illegal financial activities. The exchange of fiat currency and virtual currency within the territory, exchange of virtual currencies, acting as a central counterparty in buying and selling virtual currencies, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and trading of virtual currency-related financial products, etc., fall under illegal financial activities, such as suspected illegal issuance of token vouchers, unauthorized public issuance of securities, illegal operation of securities and futures business, illegal fundraising, etc., are strictly prohibited across the board and resolutely banned in accordance with the law. Overseas entities and individuals are not allowed to provide virtual currency-related services to domestic entities in any form.

A stablecoin pegged to a fiat currency indirectly fulfills some functions of the fiat currency in circulation. Without the consent of relevant authorities in accordance with the law and regulations, any domestic or foreign entity or individual is not allowed to issue a RMB-pegged stablecoin overseas.

（II）Tokenization of Real-World Assets refers to the use of encryption technology and distributed ledger or similar technologies to transform ownership rights, income rights, etc., of assets into tokens (tokens) or other interests or bond certificates with token (token) characteristics, and carry out issuance and trading activities.

Engaging in the tokenization of real-world assets domestically, as well as providing related intermediary, information technology services, etc., which are suspected of illegal issuance of token vouchers, unauthorized public offering of securities, illegal operation of securities and futures business, illegal fundraising, and other illegal financial activities, shall be prohibited; except for relevant business activities carried out with the approval of the competent authorities in accordance with the law and regulations and relying on specific financial infrastructures. Overseas entities and individuals are not allowed to illegally provide services related to the tokenization of real-world assets to domestic entities in any form.

II. Sound Work Mechanism

(III) Inter-agency Coordination. The People's Bank of China, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of virtual currency-related illegal financial activities.

The China Securities Regulatory Commission, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of illegal financial activities related to the tokenization of real-world assets.

(IV) Strengthening Local Implementation. The people's governments at the provincial level are overall responsible for the prevention and disposal of risks related to virtual currencies and the tokenization of real-world assets in their respective administrative regions. The specific leading department is the local financial regulatory department, with participation from branches and dispatched institutions of the State Council's financial regulatory department, telecommunications regulators, public security, market supervision, and other departments, in coordination with cyberspace departments, courts, and procuratorates, to improve the normalization of the work mechanism, effectively connect with the relevant work mechanisms of central departments, form a cooperative and coordinated working pattern between central and local governments, effectively prevent and properly handle risks related to virtual currencies and the tokenization of real-world assets, and maintain economic and financial order and social stability.

III. Strengthened Risk Monitoring, Prevention, and Disposal

(5) Enhanced Risk Monitoring. The People's Bank of China, China Securities Regulatory Commission, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration of Foreign Exchange, Cyberspace Administration of China, and other departments continue to improve monitoring techniques and system support, enhance cross-departmental data analysis and sharing, establish sound information sharing and cross-validation mechanisms, promptly grasp the risk situation of activities related to virtual currency and real-world asset tokenization. Local governments at all levels give full play to the role of local monitoring and early warning mechanisms. Local financial regulatory authorities, together with branches and agencies of the State Council's financial regulatory authorities, as well as departments of cyberspace and public security, ensure effective connection between online monitoring, offline investigation, and fund tracking, efficiently and accurately identify activities related to virtual currency and real-world asset tokenization, promptly share risk information, improve early warning information dissemination, verification, and rapid response mechanisms.

(6) Strengthened Oversight of Financial Institutions, Intermediaries, and Technology Service Providers. Financial institutions (including non-bank payment institutions) are prohibited from providing account opening, fund transfer, and clearing services for virtual currency-related business activities, issuing and selling financial products related to virtual currency, including virtual currency and related financial products in the scope of collateral, conducting insurance business related to virtual currency, or including virtual currency in the scope of insurance liability. Financial institutions (including non-bank payment institutions) are prohibited from providing custody, clearing, and settlement services for unauthorized real-world asset tokenization-related business and related financial products. Relevant intermediary institutions and information technology service providers are prohibited from providing intermediary, technical, or other services for unauthorized real-world asset tokenization-related businesses and related financial products.

(7) Enhanced Management of Internet Information Content and Access. Internet enterprises are prohibited from providing online business venues, commercial displays, marketing, advertising, or paid traffic diversion services for virtual currency and real-world asset tokenization-related business activities. Upon discovering clues of illegal activities, they should promptly report to relevant departments and provide technical support and assistance for related investigations and inquiries. Based on the clues transferred by the financial regulatory authorities, the cyberspace administration, telecommunications authorities, and public security departments should promptly close and deal with websites, mobile applications (including mini-programs), and public accounts engaged in virtual currency and real-world asset tokenization-related business activities in accordance with the law.

(8) Strengthened Entity Registration and Advertisement Management. Market supervision departments strengthen entity registration and management, and enterprise and individual business registrations must not contain terms such as "virtual currency," "virtual asset," "cryptocurrency," "crypto asset," "stablecoin," "real-world asset tokenization," or "RWA" in their names or business scopes. Market supervision departments, together with financial regulatory authorities, legally enhance the supervision of advertisements related to virtual currency and real-world asset tokenization, promptly investigating and handling relevant illegal advertisements.

（IX） Continued Rectification of Virtual Currency Mining Activities. The National Development and Reform Commission, together with relevant departments, strictly controls virtual currency mining activities, continuously promotes the rectification of virtual currency mining activities. The people's governments of various provinces take overall responsibility for the rectification of "mining" within their respective administrative regions. In accordance with the requirements of the National Development and Reform Commission and other departments in the "Notice on the Rectification of Virtual Currency Mining Activities" (NDRC Energy-saving Building [2021] No. 1283) and the provisions of the "Guidance Catalog for Industrial Structure Adjustment (2024 Edition)," a comprehensive review, investigation, and closure of existing virtual currency mining projects are conducted, new mining projects are strictly prohibited, and mining machine production enterprises are strictly prohibited from providing mining machine sales and other services within the country.

（X） Severe Crackdown on Related Illegal Financial Activities. Upon discovering clues to illegal financial activities related to virtual currency and the tokenization of real-world assets, local financial regulatory authorities, branches of the State Council's financial regulatory authorities, and other relevant departments promptly investigate, determine, and properly handle the issues in accordance with the law, and seriously hold the relevant entities and individuals legally responsible. Those suspected of crimes are transferred to the judicial authorities for processing according to the law.

（XI） Severe Crackdown on Related Illegal and Criminal Activities. The Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, as well as judicial and procuratorial organs, in accordance with their respective responsibilities, rigorously crack down on illegal and criminal activities related to virtual currency, the tokenization of real-world assets, such as fraud, money laundering, illegal business operations, pyramid schemes, illegal fundraising, and other illegal and criminal activities carried out under the guise of virtual currency, the tokenization of real-world assets, etc.

（XII） Strengthen Industry Self-discipline. Relevant industry associations should enhance membership management and policy advocacy, based on their own responsibilities, advocate and urge member units to resist illegal financial activities related to virtual currency and the tokenization of real-world assets. Member units that violate regulatory policies and industry self-discipline rules are to be disciplined in accordance with relevant self-regulatory management regulations. By leveraging various industry infrastructure, conduct risk monitoring related to virtual currency, the tokenization of real-world assets, and promptly transfer issue clues to relevant departments.

IV. Strict Supervision of Domestic Entities Engaging in Overseas Business Activities

（XIII） Without the approval of relevant departments in accordance with the law and regulations, domestic entities and foreign entities controlled by them may not issue virtual currency overseas.

（XIV） Domestic entities engaging directly or indirectly in overseas external debt-based tokenization of real-world assets, or conducting asset securitization activities abroad based on domestic ownership rights, income rights, etc. (hereinafter referred to as domestic equity), should be strictly regulated in accordance with the principles of "same business, same risk, same rules." The National Development and Reform Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other relevant departments regulate it according to their respective responsibilities. For other forms of overseas real-world asset tokenization activities based on domestic equity by domestic entities, the China Securities Regulatory Commission, together with relevant departments, supervise according to their division of responsibilities. Without the consent and filing of relevant departments, no unit or individual may engage in the above-mentioned business.

(15) Overseas subsidiaries and branches of domestic financial institutions providing Real World Asset Tokenization-related services overseas shall do so legally and prudently. They shall have professional personnel and systems in place to effectively mitigate business risks, strictly implement customer onboarding, suitability management, anti-money laundering requirements, and incorporate them into the domestic financial institutions' compliance and risk management system. Intermediaries and information technology service providers offering Real World Asset Tokenization services abroad based on domestic equity or conducting Real World Asset Tokenization business in the form of overseas debt for domestic entities directly or indirectly venturing abroad must strictly comply with relevant laws and regulations. They should establish and improve relevant compliance and internal control systems in accordance with relevant normative requirements, strengthen business and risk control, and report the business developments to the relevant regulatory authorities for approval or filing.

V. Strengthen Organizational Implementation

(16) Strengthen organizational leadership and overall coordination. All departments and regions should attach great importance to the prevention of risks related to virtual currencies and Real World Asset Tokenization, strengthen organizational leadership, clarify work responsibilities, form a long-term effective working mechanism with centralized coordination, local implementation, and shared responsibilities, maintain high pressure, dynamically monitor risks, effectively prevent and mitigate risks in an orderly and efficient manner, legally protect the property security of the people, and make every effort to maintain economic and financial order and social stability.

(17) Widely carry out publicity and education. All departments, regions, and industry associations should make full use of various media and other communication channels to disseminate information through legal and policy interpretation, analysis of typical cases, and education on investment risks, etc. They should promote the illegality and harm of virtual currencies and Real World Asset Tokenization-related businesses and their manifestations, fully alert to potential risks and hidden dangers, and enhance public awareness and identification capabilities for risk prevention.

VI. Legal Responsibility

(18) Engaging in illegal financial activities related to virtual currencies and Real World Asset Tokenization in violation of this notice, as well as providing services for virtual currencies and Real World Asset Tokenization-related businesses, shall be punished in accordance with relevant regulations. If it constitutes a crime, criminal liability shall be pursued according to the law. For domestic entities and individuals who knowingly or should have known that overseas entities illegally provided virtual currency or Real World Asset Tokenization-related services to domestic entities and still assisted them, relevant responsibilities shall be pursued according to the law. If it constitutes a crime, criminal liability shall be pursued according to the law.

(19) If any unit or individual invests in virtual currencies, Real World Asset Tokens, and related financial products against public order and good customs, the relevant civil legal actions shall be invalid, and any resulting losses shall be borne by them. If there are suspicions of disrupting financial order and jeopardizing financial security, the relevant departments shall deal with them according to the law.

This notice shall enter into force upon the date of its issuance. The People's Bank of China and ten other departments' "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (Yinfa [2021] No. 237) is hereby repealed.

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