CFTC Updates Crypto Rules for Tokenized Assets and Blockchain Records, What Changed?

• CFTC crypto rules now provide clearer Crypto guidance for Tokenized assets and Blockchain Records, days after the Clarity Act failed to advance.
• Regulated derivatives firms can use eligible Tokenized assets for customer funds when they represent permitted investments and meet existing requirements.
• The updated Blockchain Records guidance allows regulated firms to use blockchain for certain recordkeeping requirements.

In the recent development, the CFTC has updated its crypto guidance, catering to blockchain-based financial markets. These updates have arrived shortly after the Clarity Act failed to progress in the US Senate, showing that regulators are continuing to address issues around the crypto arena. The CFTC has updated its FAQs regarding crypto assets and blockchain tech. The intent behind this update was to deliver quick clarity to firms on using tokenized assets and blockchain for record keeping.

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What Are The New CFTC Crypto Rules?

The updated crypto rules and the crypto guidance arena focuses on two main areas. Firstly, registered derivatives firms can now invest customer funds in tokenized assets.

“Brokers and clearinghouses can invest customer funds in tokenized versions of approved investments, if the tokens carry the same legal rights. Tokenized government money market funds are included, with a custodian’s written acknowledgment. Swap dealers can now use tokenized money market fund shares as margin for uncleared swaps.”

However, this can only happen when the tokenized versions represent investments that are already permitted under applicable CFTC rules.

The token must also provide its holder with legal and economic rights that are the same as, or functionally equivalent to, those attached to the traditional asset.

“Brokers, exchanges and clearinghouses can use blockchains to meet recordkeeping rules. Firms can keep records only on-chain, with no off-chain copy required. Firms on public blockchains must still be able to produce records if the network goes down.”

Second, the CFTC said it would not object to registered firms using blockchain records to meet certain recordkeeping requirements.

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Why Does This CFTC Update Matter?

These updates have arrived at a time when the Clarity Act failure is still fresh in the minds of traders. The Senate failed to advance the Clarity Act on September 15, while CFTC Chair Michael Selig stated that the agency can continue working on crypto rules under its existing authority.

The current update is limited to tokenized assets and how regulated firms can use them. However, it gives regulated firms more clarity on how existing CFTC requirements apply when they use tokenized assets and blockchain-based records. The CFTC has not said that the failed Clarity Act vote prompted this update.

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