The U.S. Commodity Futures Trading Commission has issued a staff FAQ that expands guidance on a pilot program allowing certain crypto assets to be used as collateral in derivatives markets. The Market Participants Division and the Division of Clearing and Risk answered questions arising from two December staff letters that established the pilot, and set expectations for futures commission merchants (FCMs) and clearing organizations that choose to participate.
FCMs that want to accept crypto as customer margin must file a notice with the Market Participants Division identifying the date they will begin accepting such collateral. The December letters previously clarified which tokenized assets may be accepted, how to value them, and how to compute margin requirements; the new FAQ further aligns CFTC expectations with the SEC on capital treatment.
Capital charges: the FAQ calls for consistency with the SEC’s approach — a 20% capital charge for Bitcoin (BTC) and Ether (ETH) positions and a 2% charge for stablecoins.
Initial pilot restrictions and reporting: for the first three months of a firm’s participation, FCMs may accept only BTC, ETH, or stablecoins as customer margin. During that initial period they must promptly report any significant cybersecurity or system incidents and submit weekly reports detailing total crypto held across customer account types. After three months, firms may begin accepting other cryptocurrencies and the weekly reporting requirement will cease.
Segregation and permitted uses: only proprietary payment stablecoins may be deposited as residual interest in customer segregated accounts; other crypto assets are not permitted for that purpose. Crypto and stablecoins are not eligible as collateral for uncleared swaps. Swap dealers may, however, use tokenized versions of eligible assets if the tokenized form satisfies regulatory requirements and provides the same legal and economic rights as the traditional asset.
Clearing organizations: derivatives clearing organizations (DCOs) may accept crypto and stablecoins as initial margin for cleared transactions provided those assets meet the CFTC’s standards concerning minimal credit, market, and liquidity risk.
FCMs participating in the pilot must follow the filing, reporting, and risk-management expectations described in the FAQ as the CFTC and other agencies continue refining oversight and operational standards for crypto collateral in derivatives markets.