CFTC Says Derivatives Firms Can Use Tokenized Assets and Blockchain Records

The U.S. Commodity Futures Trading Commission has clarified that regulated derivatives firms can invest customer funds in tokenized versions of assets already permitted under its rules. CFTC staff also said blockchain-based records can satisfy regulatory record keeping requirements when applicable conditions are met. The guidance does not expand the underlying list of investments firms can hold with customer funds.

Tokenized Assets Must Preserve Required Rights

Under CFTC Regulation 1.25, futures commission merchants and derivatives clearing organizations can invest customer funds in specified assets, including certain government securities and money market funds.

A tokenized asset must satisfy applicable regulatory requirements and give its holder legal and economic rights that are the same as, or functionally equivalent to, those attached to the asset in traditional form. Firms must still comply with applicable custody, segregation, liquidity, and other regulatory requirements.

Guidance Does Not Make Every Crypto Asset Eligible

The update does not give firms broad permission to invest customer funds in Bitcoin, Ether, or stablecoins. CFTC staff said Regulation 1.25 still determines which investments are permitted. Tokenization therefore does not make an otherwise ineligible asset permissible.

Blockchain Records Can Satisfy CFTC Rules

CFTC staff also said regulated entities can use blockchain or distributed-ledger technology to create and maintain required records. For public, permissionless networks, firms should maintain systems and controls that ensure records can be retained and produced even if access to the network or related blockchain infrastructure is disrupted. The update represents staff views and does not create a new Commission rule.

CFTC Expands Digital-Asset Guidance

The FAQs build on earlier CFTC guidance covering tokenized collateral and digital assets used as margin. CFTC Chairman Michael Selig said the update was intended to provide additional regulatory clarity.

“I’m pleased to see staff update these frequently asked questions consistent with the agency’s ongoing efforts to provide regulatory clarity for the crypto industry.”