Endgame for business hours markets. Michael Selig, chairman of the Commodity Futures Trading Commission (CFTC), warned bond market specialists gathered at the New York Fed that the next decade would transform American finance more than the previous ones combined. His watchword: prepare the markets for âmass tokenizationâ.
The American derivatives watchdog describes projects already open: stablecoins accepted as collateral, continuous trading, tokenized shares exchanged on-chain. The big crypto law is still waiting in the Senate.
Key Points
Michael Selig warns that the next decade will change financial markets more than the previous decades combined
Since February, the CFTC has accepted stablecoins issued by national trust banks as eligible collateral
Consultation underway on 24-hour trading of energy derivatives, while SEC publishes its âinnovation exemptionâ
In the absence of a law passed in the Senate, the two regulators are moving forward through the administrative route, faster but reversible
âMass tokenizationâ: What the CFTC is preparing for the US markets
The annual conference on the US Treasury market brings together primary dealers, the Treasury and regulators at the New York Fed, representing the piping of nearly $30,000 billion in negotiable debt. It was in front of this audience, rarely focused on technological enthusiasm, that Michael Selig unfolded his agenda:
âWith developments like tokenization, on-chain finance and 24/7 trading, the next decade will likely bring more change to financial markets than previous decades combined. »
Tokenizing an asset consists of registering ownership on a blockchain in the form of a continuously transferable token, with almost instantaneous settlement where traditional markets still work on D+1. Applied to Treasury bonds, the process transforms collateral that sleeps at night and on weekends into guarantee that can be mobilized at any time.
Tokenized money funds from BlackRock and Franklin Templeton have led the way, and around $15 billion of U.S. government debt is already circulating in tokens.
Mr. Selig also headed the legal department of the SEC's crypto working group before taking the helm of the CFTC. He wants the United States to keep control of this seesaw:
âAcross the Trump administration, we have already laid the foundation to continue to do so by embracing innovation, encouraging competition, right-scaling regulation, and preserving the trust that has made our markets the global standard.â »
Stablecoins as collateral and 24/7 trading: The CFTC is no longer waiting for Congress
The agency has begun to turn the rhetoric into rules. In February, it expanded its list of eligible collateral for stablecoins issued by national trust banks, these institutions federally approved by the OCC, the American banking regulator. An operator can therefore deposit dollar-indexed tokens as margin with a clearing house, without a bank transfer subject to opening hours.
The CFTC will seek other ways to âencourage responsible adoption of stablecoins by market participants, platforms and clearing houses,â its president said.
The ongoing negotiation file follows the same trajectory. The CFTC published guidance and then launched a public consultation on the 24-hour operation of energy derivatives markets.
The model comes directly from the crypto world, where bitcoin has been trading continuously since 2009, including weekends and public holidays. Nasdaq, for its part, is aiming for a session extended to 24 hours over five days, subject to the regulatory green light.
The SEC is moving in parallel. The stock market regulator published its long-awaited âinnovation exemptionâ last week, which opens the door to on-chain trading of tokenized stocks. The two agencies are thus progressing through administrative channels, due to a lack of legislative text: the major market structure law intended to clearly distribute their respective powers remains blocked in the Senate.
But this method has a cost. An exemption, a letter of no action or an update of the list of collaterals are undone as quickly as they are signed, at the discretion of the majorities. The players who are building tokenized settlement infrastructures today are doing so on a solid foundation in the short term and revocable in the medium term, which only the vote of a law would lock.
