The Commodity Futures Trading Commission (CFTC) has approved the use of blockchain technology to manage trading collateral in U.S. derivatives markets, according to a report released by the CFTC Global Markets Advisory Committee on November 21. .
Blockchain technologies, including distributed ledgers and tokenization, can address long-standing challenges of traditional derivatives exchanges and expand the variety of assets available for collateral trading, the report said.
“There have been successful, proven commercial uses for asset tokenization around the world,” CFTC Commissioner Caroline D. Pham added in a statement.
“Now we can finally begin to make progress on U.S. regulatory clarity for digital assets.”
Among other things, the report said, blockchain networks can “facilitate the real-time, 24/7 transfer of (collateralized) assets without costly or complex connections across multiple intermediaries.”
“It can also allow peer-to-peer transfers. “This means that anyone who owns an asset can transfer or pledge that asset without having to trade through a broker,” he added.
The Depository Trust and Clearing Corporation (DTCC) is piloting payment transactions on a blockchain network. source: DTCC
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Traders are often required to post collateral, or “margin,” to secure a trade until it is completed.
The CFTC plays an important role in regulating commodity derivatives markets, including exchanges for futures and options trading, and overseeing the U.S. cryptocurrency market.
How Trump Will Shape the CFTC’s Approach to Blockchain
US President-elect Donald Trump, who has pledged to make the US the ‘crypto capital of the world’, is reportedly considering a cryptocurrency-friendly member to lead the CFTC when his presidential term begins on January 20, 2025.
Under President Joe Biden, the Securities and Exchange Commission and CFTC have taken an aggressive regulatory stance on cryptocurrencies, taking hundreds of actions against companies in the industry.
Republican CFTC Commissioner Summer Mersinger, who has urged regulators to take a more receptive stance toward cryptocurrencies, is among those being considered for the chair of the agency.
Commissioner Pham also took a pro-cryptocurrency stance, with the CFTC last September accusing decentralized exchange Uniswap of operating an unregistered derivatives exchange.
Is the SEC next to embrace blockchain?
In addition to the CFTC, there will also be a leadership change at the SEC. SEC Chairman Gary Gensler, known for his hard-line stance on cryptocurrency regulation, announced on November 21 his plans to leave the SEC on January 20, 2025.
source: Gary Gensler
Even before the post-election overhaul of the SEC and CFTC, there were signs that regulators and trading platforms were beginning to accept tokenized assets as trading collateral.
Last September, the Depository Trust and Clearing Corporation, the United States’ central clearinghouse for securities trading, completed a pilot program exploring the use of tokenized U.S. Treasury securities as trading margin.
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