CFTC advisory committee recommends use of tokenized assets as collateral

An advisory committee of the Commodity Futures Trading Commission has voted in favor of allowing tokenized assets to be used as collateral for margin trading.

The CFTC’s Global Markets Advisory Committee forwarded the recommendation around these blockchain or distributed ledger technology assets via its digital assets markets subcommittee, according to a press release on Nov. 21.

The proposals will now proceed to the full GMAC Committee, with the next steps to be determined by the CFTC, the U.S. derivatives markets regulator.

This development could lead to tokens of money-market funds like BlackRock’s BUIDL and Franklin Templeton’s FOBXX being used as collateral in traditional derivatives markets. These funds are part of the expanding tokenized assets market.

The digital assets markets subcommittee stated that no regulatory changes are required to enable the use of tokenized assets as collateral for margin. Commenting on the recommendations, CFTC Commissioner Caroline D. Pham noted:

“All over the world, there have been successful and proven commercial use cases for tokenization of assets, such as digital government bond issuances in Europe and Asia, over $1.5 trillion notional volume in institutional repo and payments transactions on enterprise blockchain platforms, and more efficient collateral and treasury management.”

The announcement underpins progress for the U.S. as it looks for regulatory clarity for the crypto industry, Pham added.

CFTC said the recommendations’ approval was unanimous and offers a legal and regulatory basis for market participants. This includes aspects such as application of existing policies, procedures, and practices so as to advance tokenized assets’ use in margin requirements.