- The CFTC Subcommittee has made recommendations on the use of DLT for tokenized collateral management.
- BlackRock’s BUIDL and Franklin Templeton’s FOBXX lead the tokenized US Treasury market.
In a major move aimed at improving portfolio diversification for investors and streamlining capital efficiency for fund managers, a The Subcommittee of the Commodity Futures Trading Commission (CFTC) has issued its recommendations on the application of Distributed Ledger Technology (DLT) in the management of non-cash collateral.
These guidelines, which focus on enabling registered companies to use DLT to hold and transfer tokenized assets, mark a crucial step toward integrating blockchain solutions within traditional financial infrastructure.
BlackRock and Franklin Templeton lead
The recommendations were forwarded to the full committee for further review. The initiative then gained traction reports from Bloomberg on October 2.
This highlights the push to use tokenized shares of money market funds from major financial institutions such as BlackRock and Franklin Templeton as collateral in trading activities.
For those unfamiliar, the subcommittee driving this progress includes influential members like Citadel, Bank of New York Mellon, and Bloomberg LP, further underscoring the momentum behind tokenization in traditional financial sectors.
That said, the proposed recommendations, if approved by the full committee later this year, could substantially boost the adoption of tokenized collateral in financial markets, allowing companies to achieve greater capital efficiency in their operations.
What else is going on?
This development would particularly benefit BlackRock’s tokenized BUIDL fund and Franklin Templeton’s FOBXX, two leading players in tokenized US government bonds.
For those who don’t know, BUIDL dominates the market with over $518 million in tokenized assets, while FOBXX holds a significant share of $435 million, according to rwa.xyz data.
Together, these two funds represent nearly half of the $2.3 billion tokenized U.S. Treasury market.
If the recommendations receive full approval, the use of tokenized collateral is therefore expected to increase, with more companies seeking capital efficiency through tokenization.
McKinsey Notes
McKinsey notes the same thing in a recent one report released on June 20, noted:
“Based on our analysis, we expect that the total tokenized market capitalization could reach approximately $2 trillion by 2030, driven by adoption in mutual funds, bonds and exchange-traded notes (ETN), lending and securitization, and alternative funds.”
They further added:
“In a bullish scenario, this value could double to around $4 trillion, but we are less optimistic than previously published estimates as we approach the middle of the decade.”
Brokers who are already interested in tokenized funds
As expected, some companies, such as crypto prime brokers Hidden Road and FalconX, are already using BlackRock’s BUIDL token as collateral. This highlights the growing adoption of tokenized assets in the financial sector.
Aave recently presented the GHO Stability Module (GSM) on August 26, aimed at using BUIDL shares to maintain the stablecoin peg to the US dollar.
Similarly, stablecoin publisher Ethena Labs unveiled plans for a new stablecoin, UStb, fully backed by BUIDL.
Credit : ambcrypto.com
