Summary

  • The U.S. CFTC said allowing trust companies to perform derivatives settlement operations could broaden crypto firms’ expansion into financial services.
  • Crypto firms including Nodal Clear, Coinbase and BitGo are expanding related businesses tied to USDC, derivatives trading and digital-asset custody services.
  • Still, the decision amounts only to a conditional regulatory exemption, while political changes and the possibility of tighter CFTC oversight could shape the expansion of trust companies’ derivatives settlement business.

Forecast Trend Report by Period

The U.S. Commodity Futures Trading Commission has cleared trust companies to handle derivatives settlement, a move that could broaden crypto firms’ reach in financial services.

Cointelegraph reported on November 10 that the CFTC issued a no-action letter on November 5 allowing derivatives clearing organizations to use trust companies that meet certain requirements for daily settlement operations. The move opens settlement work, previously limited to banks under CFTC rules, to trust companies as well.

The action followed a request Nodal Clear submitted on October 29. Trust companies must satisfy the same evaluation and supervisory standards applied to existing settlement banks. The U.S. Commodity Exchange Act allows customer funds to be held at banks or trust companies, but CFTC rules have defined settlement banks only as banks.

The derivatives settlement market is a major piece of financial infrastructure, with billions of dollars moving each day. CME Group’s average daily cleared cash transfers in the first half of this year rose to $8.7 billion from $6.7 billion a year earlier. The figure reflects profit-and-loss transfers among clearing members and does not represent revenue for settlement institutions.

Crypto firms are also expanding in the area. Nodal Clear said last year it would work with Coinbase to introduce the stablecoin USDC into U.S. futures trading. BitGo launched its Global Markets division on November 4, combining derivatives trading, financing, collateral management and settlement. Coinbase also gained the ability on November 6 to provide digital-asset custody services through a separate federally supervised trust bank.

Traditional banks, by contrast, are pushing back against crypto firms’ entry into finance. The Independent Community Bankers of America sued the Office of the Comptroller of the Currency in October, arguing that crypto firms can carry out bank-like activities without taking on the same regulatory obligations as conventional banks.

Still, the CFTC’s move has limits because it is a conditional regulatory exemption rather than a formal rule change. Jordan Yagel, a lawyer at Buchanan Ingersoll & Rooney, said the letter could be withdrawn if the CFTC leadership changes. For long-term policy stability, the rules would need to be formally revised.

The political backdrop is another variable. After Democrats won majorities in both chambers in the U.S. midterm elections on November 3, oversight of the CFTC by the new Congress taking office in January could intensify. The CFTC is currently operating under Chairman Michael Selig alone, and the appointment of four vacant commissioners, along with the agency’s regulatory direction, could affect any expansion of trust companies’ derivatives settlement business.

Suehyeon Lee