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CFTC to Launch Digital Asset Pilot Under Acting Chair Pham
Regulation | Feb 10, 2025
Image: Pixabay/WorldSpectrum
CFTC Advances Digital Asset Pilot Program With Industry Giants
The U.S. Commodity Futures Trading Commission (CFTC) is launching a pilot program to test how digital assets like stablecoins can be used as collateral in financial markets. The initiative is being led by Acting Chair Caroline Pham and will explore how blockchain technology can improve market operations while maintaining oversight. To support the initiative, the CFTC is hosting a Crypto CEO Forum to launch the digital asset markets pilot including executives from industry giants such as Circle, Coinbase, Crypto.com, MoonPay, and Ripple. By working directly with industry experts to test how digital assets function in practice, the pilot aims to determine of blockchain financial products can indeed make transactions faster, reduce risks, and improve overall market stability.
Caroline Pham’s Leadership and Regulatory Shift
On January 21, 2025, Caroline Pham was appointed Acting Chair of the CFTC, replacing former Chairman Rostin Behnam. Her appointment reflects a more structured and collaborative approach to digital asset regulation. Pham has already made some moves since taking office. Notably, she's reoriented the Enforcement Division to focus on fraud prevention and investor protection instead of broad enforcement actions against digital assets. She's also appointed Harry Jung as Acting Chief of Staff, overseeing CFTC engagement with crypto, decentralized finance, and tokenization initiatives. And of course, she's progressed the digital asset pilot program (the focus of this article), which was stalled under the previous leadership.
Recent GMAC Guidance
The November 21, 2024 the Global Markets Advisory Committee (GMAC) issued guidance outlining that tokenized non-cash collateral, such as government securities and corporate debt, can be used under existing CFTC rules without requiring regulatory changes. It highlighted that distributed ledger technology was simply a new way to record and transfer assets, and firms can rely on their existing risk management policies to integrate it. The guidance recommended allowing market participants to tokenize and use eligible collateral while ensuring compliance with current legal and operational frameworks. See the slide presentation and video.
CFTC’s Digital Asset Pilot
The pilot program is setup to evaluate whether tokenized assets can function as collateral in regulated financial markets. Traditionally, firms rely on cash, government bonds, or highly liquid securities for margin requirements. The CFTC is focused on practical implementation rather than sweeping regulatory changes, so it's important that the program does not require new regulations, as existing legal frameworks allow firms to assess risks and manage tokenized collateral. Key aspects of the pilot include:
See: Responsible AI in Finance: CFTC’s New Framework
- Test tokenized versions of government securities, corporate debt, and money market funds as collateral
- Evaluate risk management standards for digital assets used in financial markets
- Assess compliance frameworks for integrating blockchain-based assets into regulated transactions
Note that in 2023, Caroline Pham introduced the concept of a digital asset pilot to explore applications in a regulatory sandbox but it was more theoretical and regulatory acceptance was uncertain. This new tokenization pilot is now more structured and being implemented under Pham's leadership and is advancing in collaboration between regulators and industry.
How This Could Impact Canada’s Fintech and Digital Asset Market
The CFTC’s approach may influence regulatory developments in Canada, where steady progress has been made in digital asset regulations particularly through the Office of the Superintendent of Financial Institutions (OSFI).
- In April 2023, OSFI launched a stablecoin consultations (fiat referenced crypto assets) to assess risks to inform future policy.
- In July 2023, OFSI proposed draft guidelines for capital and liquidity rules for banks and insurers holding crypto-assets. Final guidelines are expected in early 2025 which will look to align Canada with global standards.
- In November 2023, OFSI consulted on Public Disclosure Rules that would require financial institutions to disclose their crypto-asset exposures. New disclosure rules for banks are set to take effect in early 2026, which align with international best practices.
Additional digital assets are currently being researched and tested through sandbox programs run by provincial regulators and the Bank of Canada. Canadian fintech companies should be on the watch to see if the U.S. establishes stablecoins as valid collateral. If so, similar policies could be explored here in Canada.
See: Tech Leaders Launch Build Canada for Innovation Policy Reform
The tokenization of real world assets and financial instruments would open up new efficiencies for cross border financial transactions. Canada's financial regulators such as the CSA, IIROC, and the Bank of Canada might benefit from the CFTC's strategy and pilot program learnings and inform future policy of digital assets in Canada.
Outlook
The CFTC is in the process of finalizing the operational details of the pilot and are hosting the CEO Forum to determine how the program will be implemented and identify key risks. The data collected from market participants will be used to evaluate potential regulatory frameworks for digital assets in the U.S. and worldwide. This is a big shift in digital asset regulation. That is moving from an enforcement first approach to structured implementation testing and collaboration. If the pilot is successful, tokenized financial instruments could become a standard feature of global markets, a path that Canada would potentially follow.
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