CFTC May Approve Digital Assets As Trading Collateral By Year-End

According to Cointelegraph, the United States Commodity Futures Trading Commission (CFTC) may approve the use of digital assets as trading collateral by the end of the year. A subcommittee of the CFTC’s Global Markets Advisory Committee recently voted to recommend a proposal allowing digital ledger technology-based collateral (DLT) in commodities and derivatives trading.

If the proposal is accepted by the CFTC, traders could settle transactions using digital assets as collateral with the same speed and ease as other digital ledger and blockchain-based transactions. Brokers would be able to accept blockchain-based tokenized assets, such as BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) token, via market-embedded systems.

The use of blockchain-based assets as collateral in trading is already common among large firms like BlackRock and JP Morgan. The CFTC’s general approval could serve as a catalyst for mainstream adoption. However, it remains unclear what exactly the Global Markets Advisory Committee has recommended or what is included in the proposal. The main committee still needs to approve the subcommittee’s recommendation before the proposal can be formally submitted to the CFTC for approval.

There is no guarantee that the CFTC will approve the proposal or that it will pass without potential restrictions concerning which institutions and blockchains can participate. As Cointelegraph recently reported, spot Bitcoin exchange-traded funds (ETFs) demonstrated strong performance throughout September. BlackRock's Bitcoin ETF, in particular, saw the highest daily inflow of any fund during the month on September 25, during a five-day inflow streak across all spot Bitcoin ETFs in the United States.

The strong inflows into US spot Bitcoin ETFs in September, led by BlackRock’s fund, highlight the growing popularity and prospective value of digital assets in traditional finance markets. This trend could also influence the CFTC’s decision-making process regarding the approval of digital assets as trading collateral.