U.S. Regulatory Update: CFTC Allows Crypto Collateral, Market Structure Bill Talks Intensify

Big week: The past few days in Washington have seen a surge of crypto policy movement.

• In a major announcement, the Commodity Futures Trading Commission (CFTC) took another step toward integrating digital assets more deeply into the traditional financial system.
• At the same time, talks between Senate Democrats and Republicans over the current market structure bill grew more tense, slowing progress ahead of the holiday recess.

Crypto collateral: On Monday, the CFTC issued guidance removing outdated restrictions and clarifying how digital assets can be used in U.S. derivatives markets. It also launched a pilot program that initially allows BTC, ETH, and USDC to serve as eligible collateral under strict oversight, with further guidance expected on tokenized assets such as U.S. Treasuries.

• Why it matters: The move advances crypto’s integration into regulated markets and improves capital efficiency by letting firms post digital assets already on their balance sheets instead of converting to fiat or borrowing against them.
• Less liquidity risk: It could also strengthen liquidity management for traditional derivatives markets. As Circle President Heath Tarbert noted: “Enabling near-real-time margin settlement will mitigate settlement-failure and liquidity-squeeze risks across evenings, weekends, and holidays.”

Market structure bill: In parallel, discussions around the market structure bill — intended to provide regulatory clarity for digital assets and divide oversight between the SEC and CFTC — intensified after Democrats negotiating the bill reacted to a recent draft published by Senate Republicans. Both sides must agree on a draft before the bill can move to the full Senate.

Unresolved issues: While Democrats say they accept “significant portions” of the Republican draft, they are still pushing for changes in three key areas:

1. Stablecoin yield: Democrats want to preserve the intent of the GENIUS Act, which bars issuers from paying interest on payment stablecoins. They fear large-scale yield offerings could draw deposits away from community banks, raising bank run risks.
2. DeFi: They also seek ways to block services used by sanctioned actors and tighter oversight for platforms facilitating high-volume flows. Industry voices like the Blockchain Association’s Jake Chervinsky warn that the current draft risks treating DeFi developers like traditional intermediaries, arguing that “there is no market structure bill without developer protections, because there is no crypto without developer protections.”
3. Ethics rules: Lastly, Democrats demand tighter restrictions on lawmakers and senior officials, including limits on promoting or issuing digital assets while in office and stricter disclosure requirements.

What’s next: With these core disagreements unlikely to be resolved quickly, meaningful progress before Christmas appears highly unlikely, pushing negotiations into the new year.

Anja von Rosenstiel is a Lecturer at Boston University School of Law and a Research Fellow at several nonprofit organizations focused on supporting decentralization.

From the outside this week looks like a political battle about market structure legislation, but inside Washington the real conflict is between incumbents and a new generation of fintech and DeFi players.

At the recent Blockchain Association Policy Summit, the language wasn’t diplomatic at all. Industry leaders were talking openly about going to “war” with banks, and it became clear why: DeFi advocates are fighting to carve out neutral software interfaces from financial regulation, while banks and securities giants are working to reimpose intermediation to regulate DeFi wherever possible.

Citadel is the clearest example. After urging the SEC in its comment letter to classify DeFi interfaces dealing with tokenized securities as intermediaries, it is now rumoured in legal circles that the firm may take the SEC to court if the agency grants exemptive relief to these neutral user interfaces, since such relief could set a legal precedent against Citadel’s preferred interpretation.

You also feel the anxiety among banks. They’re exploring stablecoin issuance while fighting hard to limit open banking data access, DeFi carve outs for self-hosted wallet providers, and any yield model that threatens the coupling of deposits and lending.