CFTC Approves BTC and USDC Collateral: 2020 Ban Withdrawn

• The CFTC’s new pilot program will enable U.S. derivatives to accept digital assets as collateral.
• The initiative withdraws a 2020 advisory that banned the use of crypto as collateral.
• The move will trigger a massive institutional onramp as crypto gets legitimized in TradFi.

The Commodity Futures Trading Commission (CFTC) has executed a structural pivot in U.S. derivatives markets, launching a Digital Assets Pilot Program that formally authorizes the use of Bitcoin, Ethereum, and USDC as eligible margin collateral.

Related: Jeff Park Says CFTC Should Lead U.S. Crypto Regulation, Not SEC

Dismantling ‘Choke Point 2.0’: The 2020 Advisory Withdrawal

Acting Chairman Caroline Pham explicitly positioned the move as a regulatory modernization effort mandated by the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), which President Trump signed into law in July.

Crucially, the commission withdrew Staff Advisory 20-34, a controversial 2020 directive that had effectively banned FCMs from holding virtual currency as customer funds. Pham noted that the advisory was “outdated” and acted as a “concrete ceiling on innovation,” a sentiment echoed by Coinbase Chief Legal Officer Paul Grewal, who stated the withdrawal removes the final barrier to capital efficiency.

“The CFTC is also providing regulatory clarity through tokenized collateral guidance for real-world assets like the U.S. Treasuries, and withdrawing CFTC requirements that are now outdated under the GENIUS Act,” Chair Pham noted.

The CFTC’s new pilot program is part of its Crypto Sprint, which aims to implement recommendations from President Donald Trump’s Working Group on Digital Asset Markets report. 

Related: SEC Chair Atkins Formalizes ‘Tokenization First’ Policy to Modernize U.S. Capital Markets

CFTC Approves Use of BTC, ETH, and USDC as Collateral in Trillion-dollar Derivatives Markets

The new digital assets pilot program will unlock a massive institutional adoption of crypto assets – led by Bitcoin (BTC), Ethereum (ETH), and USDC –  through regulated means. 

According to the announcement, the pilot program will first run for the next three months and require weekly reporting to the CFTC from the regulated exchanges.

The CFTC’s pilot program to connect traditional finance and digital assets has received an overwhelming response from the crypto community. According to Paul Grewal, Coinbase Chief Legal Officer, the CFTC’s new pilot program will significantly improve traditional finance as per the requirements of the GENIUS Act.

Kris Marszalek, co-founder and CEO of Crypto.com, noted that 24/7 trading in the United States for traditional markets is now a reality. Heath Tarbert, President of Circle, highlighted that the pilot program will significantly reduce settlement friction and help advance the U.S. dollar as a global reserve currency. 

“Enabling near-real-time margin settlement will mitigate settlement failure and liquidity squeeze risks across evenings, weekends, and holidays, Tarbert noted.

Why is the Move a Major Shift?

The CFTC’s new pilot program legitimizes crypto as a real collateral in traditional finance, which is a trillion-dollar industry. For the first time, regulated U.S. Futures Commission Merchants (FCMs) can accept crypto as margin collateral for leveraged derivatives trades.

The CFTC move, combined with the initiatives from its sister agency Securities and Exchange Commission (SEC), is a major crack that enables the mainstream adoption of crypto. Furthermore, the CFTC is likely to incorporate other digital assets, led by XRP and Solana (SOL), once the pilot program ends in three months.

As such, the exponential demand for crypto assets through regulated means will play a crucial role in the long-term bullish outlook.