The Commodity Futures Trading Commission (CFTC) updated its set of frequently asked questions clarifying aspects of the tokenized collateral and digital asset margin collateral framework. While the previous FAQ stated that the client funds of Futures Commission Merchants (FCMs) and clearing houses may not be invested in stablecoins, which remains the case, the latest update says that certain tokenized money market funds (MMFs) and Treasuries are acceptable.
For these tokenized assets to qualify, there are two practical hurdles. The token must be held at a permitted depository, which we’d observe may include many of the recently authorized OCC national trust companies. And for tokenized government MMFs, the entity holding the tokens on the FCM’s behalf must provide an acknowledgment letter confirming they are segregated client assets, free of liens. A general principle the CFTC previously established is that a token must carry the same legal rights as the conventional asset.
Per the previous FAQ, generally uncleared swaps have stricter rules which don’t allow cryptocurrencies or stablecoins as collateral, so only tokenized versions of eligible assets are allowed for margin purposes. We already assumed that included tokenized MMFs, and the FAQ now explicitly states this. However, since the previous FAQ, the uncleared swap margin rules were amended to accept MMFs that use repo and securities lending, which previously disqualified most funds.
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