The Commodity Futures Trading Commission (CFTC) is quietly laying the groundwork to support a market structure where U.S. government securities and cryptocurrencies can coexist in the future
On December 12, the CFTC approved the expansion of cross-margining for U.S. government securities
How does the new CFTC order affect crypto?
This change opens opportunities for certain customers, not just clearing members, to balance margin requirements between U.S. government bond futures cleared with CME Group. CME Group is one of the largest crypto derivatives trading platforms in the United States.
Furthermore, this change also encompasses U.S. government cash bonds cleared with the Depository Trust and Clearing Corporation under the Fixed Income Clearing Corporation.
The expansion of cross-margining to customer levels will enhance capital efficiency, increasing liquidity and flexibility for U.S. government bonds, which are considered the world's most important market. Caroline Pham, acting chair of the CFTC, revealed.
Cross-margining allows companies to reduce total collateral by offsetting with related positions in the portfolio. The expansion of this mechanism from dealer accounts to end customers in the bond market represents a significant structural change.
Thus, market participants see this as a practical test of risk models, which these frameworks may support portfolios holding government bonds, tokenized funds, and crypto in a single clearing system in the future.
For crypto derivatives traded on CME, this order may significantly impact market movements.
If cross-margining between bonds and bond futures can be effectively expanded, this type of framework in the future may accommodate more complex portfolios, which may include tokenized treasury bills and spot Bitcoin used to back positions in CME Bitcoin and ETH futures, all under a comprehensive margin and risk control system.
At the same time, the timing of this order aligns with the broader regulatory direction for crypto involving both the CFTC and the Securities and Exchange Commission (SEC).
Additionally, it reflects the SEC's efforts to reform market structures and clearing processes, as the regulatory agency is assessing how tokenized securities and digital collateral can fit into existing settlement frameworks and asset oversight.
Importantly, the committee led by Pham has recently launched the Digital Asset Collateral pilot program, which allows the use of Bitcoin, Ethereum, and USDC as margin in the derivatives market regulated by the CFTC.
These trends reflect a commitment to capital efficiency and risk management across different assets, as the boundary between traditional and digital markets becomes increasingly blurred.
