US CFTC Clarifies Tokenized Asset Investment Guidelines and Blockchain Record-Keeping

The US Commodity Futures Trading Commission (CFTC) has updated its guidance on customer funds invested in tokenized assets and blockchain record-keeping. The changes, effective September 24, clarify requirements for futures commission merchants (FCMs), derivatives clearing organizations (DCOs), and other market participants.

According to the CFTC's Michael S. Selig, chairman of the Commission, this update is part of ongoing efforts to provide regulatory clarity in the digital asset markets.

The updated FAQs add four new questions, including Q12, which addresses whether FCMs and DCOs can invest customer funds in tokenized assets compliant with CFTC Rule 1.25. The answer is yes, but only if the underlying asset is a qualified investment under Rule 1.25.

Additional requirements include ensuring that token holders have identical or functional equivalent legal and economic rights to traditional assets and meeting specific conditions such as liquidity, concentration limits, maturity, and product characteristics. Tokenized government money market funds (MMFs) must also obtain written confirmation from a qualified custodian.

The CFTC has clarified its stance on record-keeping in three new questions, Q13-Q15. According to the FAQs, the Commission does not object to using blockchain for record-keeping, as long as it meets the requirements of Rule 1.31 and is technology-neutral. The Commission also emphasizes the importance of ensuring electronic records' authenticity and reliability through proper systems and management.