The Commodity Futures Trading Commission (CFTC) is quietly preparing a market structure in which US Treasury bonds and cryptocurrencies can ultimately coexist.
On December 12, the CFTC approved an expansion of cross-margining for US Treasury bonds.
How the CFTC's new decision affects crypto
With this change, certain customers, not just clearing members, can offset their margin requirements between Treasury futures at CME Group. CME Group is one of the largest crypto-derivatives trading platforms in the US.
This also applies to cash government bonds settled at the Depository Trust and Clearing Corporation’s Fixed Income Clearing Corporation.
"Expanding cross-margining to clients ensures capital efficiency, which can enhance liquidity and resilience in U.S. government bonds – the most important market in the world," said Caroline Pham, the acting chair of the CFTC.
With cross-margining, companies can reduce the total collateral required by offsetting correlated positions within a portfolio. Expanding this mechanism from dealers to end clients creates a significant change in the market structure for government bonds.
Market participants view this as a test case for risk models. These models could ultimately support portfolios with government bonds, tokenized funds, and crypto-assets within one settlement system.
For crypto derivatives traded on the CME, these measures could have significant implications for the market.
If government bonds and Treasury futures can be processed on a large scale through cross-margining, similar systems could eventually support more complex portfolios. Such portfolios could consist of tokenized government bonds and spot Bitcoin, covering positions in CME Bitcoin and ETH futures, all managed through uniform margin and risk controls.
The timing of this decision fits into a broader effort around crypto regulation, involving both the CFTC and the Securities and Exchange Commission (SEC).
This also aligns with the SEC's concurrent work on market structure and settlement reforms. Regulators are assessing how tokenized securities and digital collateral may fit with existing arrangements for settlement and custody.
Notably, the Commission led by Pham recently introduced a Digital Asset Collateral Pilot. This pilot allows Bitcoin, Ethereum, and USDC to be used as collateral in CFTC-regulated derivatives markets.
These steps demonstrate that regulators are focusing on capital efficiency and risk management for various asset classes, increasingly blurring the lines between traditional and digital markets.
