US CFTC staff clarifies requirements for the use of crypto assets as collateral

On March 22, the U.S. Commodity Futures Trading Commission further elaborated on its requirements for the use of crypto assets as collateral in the context of a pilot program launched last year. In a notice issued Friday, the CFTC Market Participation Division and Clearing and Risk Division responded to frequently asked questions raised by two staff letters last December. The two letters set up a pilot to allow the use of crypto assets as collateral in the derivatives market. The notice reminds futures brokers wishing to participate in the pilot that they must submit a notice to the Market Participation Department "including the date when they begin accepting clients 'crypto assets as margin collateral." The encryption industry believes that encryption technology is most suitable for round-the-clock transactions and instant settlement. In its December guidance, the CFTC clarified which tokenized assets could be used as collateral, how to value them and calculate the amount of collateral needed to trade positions. The U.S. CFTC made it clear that its regulatory guidelines will be consistent with the U.S. SEC, and the two institutions are jointly developing a regulatory framework for cryptocurrencies. The CFTC noted that the capital requirements used to cover losses will be "consistent" with those of the SEC: futures brokers should impose a 20% capital requirement for BTC and ETH positions, while a 2% capital requirement for stablecoins will apply. The notice also added that futures brokers (FCMs) participating in the pilot can only accept BTC, ETH or stablecoins as collateral for the first three months and must report any significant cybersecurity or system issues in a timely manner. At the same time, these institutions are also required to submit weekly reports to disclose the total amount of crypto assets held in various customer accounts. After the three-month pilot period ends, other crypto assets will be allowed to be accepted as collateral, and the above-mentioned regular reporting requirements will also be lifted.