CFTC Issues Guidance on Use of Digital Assets as Regulatory Margin

The CFTC Market Participants Division, Division of Market Oversight, and Division of Clearing and Risk ("the Divisions") issued three letters that allow, to a limited extent, the use of digital assets as regulatory margin.  

In CFTC Letter 25-39, the Divisions provided guidance to market participants regarding the use of tokenized assets as collateral for futures and swaps, permitting this use provided that such assets met existing regulatory standards for liquidity, custody, and risk management.

In the case of tokenized assets—such as digital representations of U.S. Treasuries, money market funds, or corporate bonds recorded on a blockchain—the staff emphasized that while the technology used to record ownership differs from traditional methods, the fundamental characteristics of the asset must still meet established eligibility requirements. The guidance encouraged market participants to focus on assets that are already eligible as regulatory margin, ensuring they possess minimal credit, market, and liquidity risks.

The guidance further clarified that registrants must analyze tokenized collateral on an asset-by-asset basis to ensure legal enforceability and proper valuation. It highlighted that haircuts for these assets should utilize the same risk-based approach applied to traditional assets, though adjustments might be necessary to account for specific risks such as settlement-time differences or liquidity constraints associated with the tokenization structure. Additionally, the staff stressed the importance of operational readiness, including cybersecurity measures and the ability to manage keys and access rights effectively within existing risk management frameworks.

The guidance was conditioned on market participants ensuring that tokenized assets satisfy all applicable legal and regulatory requirements, including legal enforceability of security interests, proper segregation and custody by eligible custodians, and adherence to risk management programs. The staff explicitly noted that this guidance does not create new rules, rights, or binding obligations, nor does it grant specific relief or a no-action position; rather, it clarifies how existing frameworks apply to these innovative assets and requires an individual analysis of any tokenization structure.

In CFTC Letter 25-40, a no-action letter — the Market Participants Division ("MPD") permitted FCMs to accept certain non-securities digital assets (specifically payment stablecoins, Bitcoin, and Ether) as customer margin collateral. The relief allows FCMs to account for these assets in regulatory capital and segregation calculations, subject to valuation, haircut, and reporting conditions. 

The Division confirmed that it would not recommend enforcement action if an FCM accepts non-securities digital assets, such as payment stablecoins, Bitcoin, and Ether, as customer margin. This position allows FCMs to account for the value of these assets when determining if a customer account is undermargined and when performing required segregation calculations. The relief addresses regulatory uncertainty that previously discouraged FCMs from accepting digital collateral and supports innovations such as "inverse" contracts, where a contract is both based on and denominated in a digital asset. Additionally, the letter permits FCMs to deposit their own proprietary payment stablecoins into segregated customer accounts to meet residual interest requirements. 

In CFTC Letter 25-41, the MPD withdrew prior CFTC Staff Advisory No. 20-34 in its entirety, effective immediately. The prior guidance for futures commission merchants concerned the acceptance of virtual currencies into segregation. The MPD said that recent legislative and regulatory developments rendered the guidance outdated, specifically, the enactment of new legislation establishing a framework for payment stablecoins and the launch of a regulatory initiative regarding tokenized collateral in derivatives markets superseded the old advisory.