Crypto24 September, 20263 min read
CFTC Updates Guidance Allowing Tokenized Asset Investments And Blockchain Recordkeeping
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CFTC allows regulated firms to invest in tokenized assets and use blockchain records. Agency states tokenized assets may be treated like the underlying goods they tokenize for compliance.
5 outlets told this the same way.
CFTC opens tokenization
The U.S. Commodity Futures Trading Commission issued updated guidance telling CFTC-regulated platforms that customer funds may be invested in the tokenized forms of assets that already meet the requirements as permitted.
The CFTC said firms need to ensure that "the tokenized form of the asset grants the holder legal and economic rights that are the same or functionally equivalent" to the rights in the traditional form.
The CFTC also said its agency staff "would not object if a records entity utilized blockchain" to create and maintain onchain records and satisfy recordkeeping obligations.
The guidance said regulated businesses may not even have to maintain offchain versions of the records if the firm is using a private network, and it said public and permissionless blockchains require systems and controls to retain and produce records under disruption.
CFTC Chairman Mike Selig said, "I’m pleased to see staff update these frequently asked questions consistent with the agency’s ongoing efforts to provide regulatory clarity for the crypto industry," as the agency continued to build crypto policy in the derivatives space.
Selig calls for mass tokenization
Michael Selig told a U.S. Treasury conference that financial markets should prepare for a “massive tokenization,” and he said regulators should adapt existing frameworks to blockchain, artificial intelligence, and onchain markets.
Selig said, “As manual signaling gave way to electronic trading and advanced our financial system, I believe tokenization can do the same for all asset classes,” while he also said the CFTC would adopt principles-based rules as tokenization and onchain finance evolve.
Raoul Pal predicted that identity, contracts, attention, data, energy, and computing power could eventually become tokenized assets traded by humans and AI agents.
Selig said, “That means we need to prepare our markets for mass tokenization,” and he added that cryptocurrencies and precious metals may be better suited for continuous trading than agriculture, energy, and certain financial products.
The CFTC chair also said in August that the agency would advance crypto rules under its existing powers if Congress did not pass the CLARITY Act, after the Senate did not manage to move the bill forward on September 15.
Regulatory momentum and gaps
The U.S. Senate’s failure to advance the Digital Asset Market Clarity Act left a regulatory gap for spot crypto markets, and the CFTC guidance framed tokenized assets and blockchain recordkeeping as acceptable within existing derivatives rules.
The CFTC guidance said it applies to any CFTC regulations involving recordkeeping and maintenance of regulatory data, and it said regulated businesses should establish systems and controls to retain and produce records under emergency or other disruption.
The CFTC also faced parallel moves from the Securities and Exchange Commission, which granted a temporary “innovation safe harbor” for trading tokenized U.S. stocks on September 17.
SEC Chair Paul Atkins said in February that such an exemption could facilitate onchain trading while regulators develop longer-term rules, and Jamie Selway said in a Bloomberg TV interview that tokenization and cryptocurrencies were “not inherently a politicized function.”
The CFTC chair’s remarks at the U.S. Treasury Market Conference on Tuesday tied tokenized collateral and 24/7 on-chain finance to faster settlement and real-time transfer of collateral between clearinghouses, intermediaries, and users.