On September 24, the Market Participants Division, Division of Market Oversight, and Division of Clearing and Risk (the Divisions) of the Commodity Futures Trading Commission (CFTC) released updates to their FAQs concerning registrant and registered entity activities relating to crypto assets and blockchain technologies. This latest version of the FAQs updates Question 5 and adds Questions 12 through 15. These changes address investment of customer funds in tokenized assets under Regulation 1.25 and the use of blockchain or distributed ledger technology (DLT) to satisfy CFTC recordkeeping obligations.

The FAQs provide useful staff views for firms evaluating tokenization and DLT.

Background

The CFTC first issued the crypto asset FAQs in March 2026 (March FAQs) after the Divisions received questions concerning the application of the CEA and CFTC regulations to crypto assets, tokenized collateral, and DLT-based systems. The Senate’s failure on September 15 to invoke cloture on the Digital Asset Market Clarity Act stalled federal efforts to pass comprehensive statutory oversight for digital assets and related technologies. The CFTC has indicated that it will be taking its own actions to fill the resulting legislative vacuum. The CFTC’s release of updated FAQs closely follows remarks by CFTC Chair Michael Selig during his September 22 address at the U.S. Treasury Market Conference, where he stated that the CFTC was prepared to establish crypto rules and market structure with or without federal legislation.

The updated FAQs are particularly relevant because tokenized securities, tokenized government money market funds, payment stablecoins, and other digital representations increasingly intersect with customer-fund segregation, clearing, margin, trading, and recordkeeping obligations. The Divisions’ approach is generally technology-neutral, but it remains anchored in the substantive protections and operational requirements of the existing rules.

Uncleared Swaps Margin Collateral (Updated Question 5)

The updated staff response to Question 5 clarifies the March FAQs’ treatment of tokenized collateral. Regulation 23.156 remains applicable, and tokenization does not make an otherwise ineligible asset eligible. A tokenized form of collateral may be used only when the underlying asset is independently eligible under Regulation 23.156 and the tokenized form satisfies the applicable legal, economic, custody, control, valuation, and other requirements. The updates distinguish an ineligible crypto asset from a tokenized form of an eligible collateral asset. The Divisions have not expanded the eligibility list for Regulation 23.156.

Tokenized Investments Under Regulation 1.25 (New Question 12)

The staff’s response to new Question 12 states that an FCM or a DCO may invest customer funds in a tokenized form of an investment otherwise permitted under Regulation 1.25, provided the tokenized form satisfies the applicable Regulation 1.25 requirements. The FAQ also addresses tokenized interests in government money market funds within the same framework. The fund and the interest must qualify under the rule. The FAQ does not create a separate exemption for tokenized assets.

Blockchain and DLT Recordkeeping (New Questions 13-15)

The staff’s response to new Question 13 states that Regulation 1.31 is technology-neutral. A records entity may use blockchain or DLT to maintain required books and records or swap data, provided that the use of the system satisfies the requirements of Regulation 1.31, such as ensuring authenticity and reliability of required records. The staff’s response to new Question 14 states that Regulation 45.2 is also technology-neutral and provides that the specified CFTC registrants and registered entities may use blockchain or DLT to maintain required books and records, provided that the use of the system satisfies the requirements of Regulation 45.2. The staff also advised entities relying on blockchain or DLT for CFTC recordkeeping to consider the implications thereof for their risk management systems and policies and procedures. The staff advised in their response to new Question 15 that entities utilizing blockchain or DLT technologies for CFTC recordkeeping purposes are not required to maintain an offchain version of those records. The staff cautioned, however, that such entities must be able to retain and produce such records even in network or block explorer disruptions and emergencies.

Practical Takeaways

  • FCMs and DCOs must consider their potential use of tokenized investments for customer funds’ investments in the context of the entire Regulation 1.25 framework. A tokenized investment must represent an investment that is otherwise permitted under Regulation 1.25 and satisfy the applicable requirements of that regulation, including where the investment is a government money market fund interest.
  • Existing recordkeeping requirements apply to blockchain and DLT systems. CFTC-registered entities may use blockchain or DLT systems, but the records must remain preservable and producible in the manner required by Regulations 1.13 and 45.2.
  • FCMs should separate customer-fund investment analysis from margin-collateral analysis. A tokenized government security or money market fund may warrant analysis under Regulation 1.25, but that does not make a crypto asset eligible margin collateral under Regulation 23.156.
  • SEFs and DCMs should review platform and market-data controls. Entities using DLT for trading, order, transaction, or market-data records should confirm that records can be reconstructed, produced, retained, and reconciled with other required systems, including during outages or changes to the underlying protocol, in line with the staff’s response to Question 15.
  • Swap dealers should document collateral rights. Before accepting tokenized collateral, firms should confirm that the token conveys the required legal and economic rights, satisfies Regulation 23.156, and can be valued, controlled, transferred, and liquidated within the applicable risk and margin framework. The staff’s updated response to Question 5 highlights that tokenization does not make an otherwise ineligible asset eligible collateral, so the analysis should focus both on whether the underlying asset meets the regulatory requirements independently and on whether the tokenized form properly conveys the required rights.

Looking Ahead

The updated FAQs, in line with Chair Selig’s recent remarks that the CFTC is poised to issue rules of the road for crypto companies, provide a meaningful signal that the CFTC will use its existing legal authority to accommodate responsible use of tokenization and DLT. We expect to see more guidance and rulemaking to come, which Lowenstein Sandler will continue to monitor closely. Lowenstein Sandler has significant experience advising crypto asset issuers and entities regulated by the CFTC, the SEC, FINRA, the NFA, and other federal and state regulators on a wide variety of regulatory matters, including the application of the federal securities and derivatives laws to digital assets, tokenized collateral, and blockchain-based systems. Please reach out to one of the listed authors of this Client Alert or your regular Lowenstein Sandler contact if you have any questions regarding the updated FAQs or their implications for your business.