Bitcoin, Ethereum Face US Leverage Authorization

What to Know:

• CFTC authorizes Bitcoin, Ethereum, and USDC as eligible margin for FCMs under a digital assets pilot program.
• The pilot aims to provide a domestic alternative to offshore trading venues while retaining safeguards for leveraged derivatives activity.
• XRP, Solana, and Ripple’s RLUSD stablecoin were excluded from the first tranche, reflecting a conservative approach to liquidity depth, volatility, and valuation ease.

The Commodity Futures Trading Commission (CFTC) is making strides in integrating digital assets into traditional financial frameworks. Their recent authorization allows Futures Commission Merchants (FCMs) to accept Bitcoin, Ethereum, and USDC as eligible margin under a digital assets pilot program, marking a significant step toward legitimizing crypto within established financial systems. This move signals a clear regulatory distinction between crypto assets suitable for trading and those deemed appropriate for use as collateral in derivatives markets.

The pilot program aims to provide institutional traders with the option to collateralize positions with assets cleared under US oversight. This approach offers a domestic alternative to high-volume offshore trading venues, ensuring the CFTC’s established safeguards for leveraged derivatives activity are maintained. The initiative also establishes a framework for assessing tokenized collateral in practice, giving regulators visibility into how digital assets perform within a system built for continuous margin calls and intraday risk checks.

The exclusion of certain crypto assets like Solana, XRP, and Ripple’s RLUSD stablecoin from the initial pilot program has sparked discussion. Analysts suggest this decision reflects a conservative approach to assessing liquidity depth, volatility, and valuation ease during periods of market stress. While XRP’s regulatory profile has evolved, its eligibility as collateral requires meeting a higher threshold focused on reliable valuation and liquidation without market disruption.

Ripple leadership views the pilot program as a positive step for the broader crypto industry, despite the initial exclusion of RLUSD. They see it as a “proof of concept” phase, validating the mechanism of tokenized collateral using USDC. This validation could pave the way for other stablecoins, like RLUSD, to eventually meet the necessary liquidity thresholds and be included in future expansions of the program.

The CFTC’s pilot program represents a significant milestone in integrating digital assets into the US financial infrastructure. It establishes a regulatory hierarchy, differentiating between assets suitable for trading and those qualified as collateral for margining. While the program is a constraint in its initial scope, it clarifies the standards required for digital assets to achieve the necessary depth, stability, custody readiness, and predictable behavior under market stress.

Related: Top US Banks Now Offer Bitcoin Loans

Source: Original article