The US Commodity Futures Trading Commission (CFTC) has provided further clarity on its pilot program allowing the use of crypto assets as collateral in derivatives markets. In a notice released on Friday, the CFTC’s Market Participants Division and Division of Clearing and Risk addressed key questions about the pilot, initiated last year.
Futures commission merchants participating in the pilot must file a notice with the Market Participants Division, specifying the start date for accepting crypto assets as margin collateral. The CFTC’s guidance aligns with the Securities and Exchange Commission (SEC) on regulatory standards, including a 20% capital charge for Bitcoin (BTC) and Ether (ETH), and a 2% charge for stablecoins.
For the first three months, only BTC, ETH, and stablecoins can be accepted as collateral, with weekly reporting required. After this period, other cryptocurrencies may be considered, and reporting will cease. The notice also specifies that only proprietary payment stablecoins can be used as residual interest in customer segregated accounts.
Crypto and stablecoins are not permitted as collateral for uncleared swaps, but swap dealers can use tokenized versions of eligible assets. Derivatives clearing organizations can accept crypto and stablecoins for initial margin in cleared transactions, provided they meet CFTC requirements for minimal credit, market, and liquidity risks.