(Bloomberg) -- Efforts to allow use of tokenized shares of money-market funds from Wall Street behemoths like BlackRock and Franklin Templeton as collateral in trading took a big step forward as a group of financial firms voted to approve guidelines for their use.
A subcommittee of the Commodity Futures Trading Commission’s Global Markets Advisory Committee voted on Tuesday to pass its recommendations on the topic to the full committee, according to two people familiar with the matter. The recommendations relate to how registered firms can use distributed ledger technology for holding and transferring non-cash collateral. A CFTC spokesperson didn’t reply to a request for comment.
These recommendations would apply existing policies and procedures to support the use of blockchain for non-cash collateral in a manner consistent with the margin requirements of the CFTC, other US regulators and derivatives clearing organizations. The full committee is expected to vote on the recommendations later this year, according to the people familiar with the matter, who asked not to be named because the vote hasn’t been made public.
Should the recommendations receive full approval, that could increase the use of tokenization, as many businesses want to pledge tokenized collateral to gain capital efficiencies. McKinsey estimates that the total tokenized market — excluding stablecoins — could reach around $2 trillion by 2030, driven by usage in mutual funds, bonds and exchange-traded notes, loans and securitizations, and alternative funds. That’s roughly equal to the size of the entire crypto market.
Crypto prime brokers Hidden Road and FalconX already have begun accepting BlackRock’s BUIDL token as collateral.
The CFTC’s Global Markets Advisory Committee’s members include Citadel, BlackRock, Bank of New York Mellon and Bloomberg LP, parent of Bloomberg News.
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