CFTC report endorses tokenizing trading collateral 

The Commodity Futures Trading Commission (CFTC) has endorsed using blockchain technology to manage trading collateral in United States derivatives markets, according to a Nov. 21 report by the CFTC’s Global Markets Advisory Committee.

Blockchain technologies — including distributed ledgers and tokenization — can address longstanding challenges for traditional derivatives exchanges and expand the variety of assets available to collateral trades, the report said.

“All over the world, there have been successful and proven commercial use cases for tokenization of assets,” CFTC Commissioner Caroline D. Pham said in a statement, adding:

“Now, we can finally begin to make progress on U.S. regulatory clarity for digital assets.”

Among other benefits, blockchain networks “can facilitate real-time, 24/7/365 transfers of the [collateral] asset without costly or complex linkages across multiple intermediaries,” the report said.

They “can also permit peer-to-peer transfers, meaning that a person owning the asset can transfer or pledge that asset without transacting through a broker,” it continued.

Related: Trump mulls tapping crypto-friendly CFTC chair: Report

Traders are often required to post collateral, or “margin,” to secure trades until they are completed.

The CFTC regulates commodity derivatives markets, such as exchanges, for trading futures and options, and plays a crucial role in overseeing US cryptocurrency markets.

How Trump will shape CFTC’s approach to blockchain

United States President-elect Donald Trump — who has promised to turn the US into the “world’s crypto capital” — is reportedly mulling tapping a crypto-friendly commissioner to lead the CFTC when he begins his presidential term on Jan. 20, 2025.

Under President Joe Biden, the Securities and Exchange Commission and CFTC have taken aggressive regulatory stances toward crypto, bringing hundreds of actions against industry firms.

Summer Mersinger, a Republican CFTC commissioner who has urged the regulator to take a more accommodating stance on crypto, is among those under consideration to chair the agency.

Commissioner Pham has also taken pro-crypto stances, including criticizing the CFTC in September for charging Uniswap, a decentralized exchange, with running an unregistered derivatives exchange.

Is the SEC next to embrace blockchain?

In addition to the CFTC, there will be leadership changes at the SEC. On Nov. 21, SEC Chair Gary Gensler, known for his hardline stance on cryptocurrency regulation, announced plans to depart from the agency on Jan. 20, 2025.

Even before the post-election shake-up at the SEC and CFTC, there were signs that regulators and trading platforms were beginning to embrace tokenized assets as collateral for trades.

In September, the Depository Trust and Clearing Corporation — the United States’ central clearinghouse for securities trades — completed a pilot program exploring using tokenized US Treasury bills as trading margin.

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