SS #34 - CFTC Greenlights Stablecoins as Collateral for Derivatives Markets

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Happy Friday, and welcome to the cusp of Q4!

The crypto sector is ending September with a surge of institutional momentum, led by two major developments in the stablecoin landscape.

First, the Commodity Futures Trading Commission (CFTC) is pushing forward a landmark initiative to explore and expand the use of tokenized collateral, including stablecoins, in derivatives markets. To understand the scale of this move: the notional value of derivatives held by U.S. commercial banks alone stands at over $206T. Integrating stablecoins into the plumbing of this massive market could dramatically enhance efficiency, reduce settlement times, and unlock significant capital, cementing the role of stablecoins in global financial infrastructure.

Simultaneously, the world's largest stablecoin issuer is making headlines: Tether is reportedly seeking a $20B funding round an astonishing $500B valuation. If successful, the move would place Tether among the world's most valuable private companies, on par with tech giants like OpenAI and SpaceX.

The theme is clear: stablecoins are transitioning from simple crypto trading tools to essential, institutionally-recognized assets with valuations to match. Don't miss a beat of this accelerating shift as we enter Q4, Stablescope has you covered!

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In Today's Edition:

• Headline: CFTC Greenlights Stablecoins as Collateral for Derivatives Markets

• Quick Bites: Tether Seeks Funding for $20B at $500B Valuation

• Yield of the Week: 24.37% APY on Midas

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HEADLINE

CFTC Greenlights Stablecoins as Collateral for Derivatives Markets

State of play: The Commodity Futures Trading Commission (CFTC) is pushing forward an initiative to explore and expand the use of tokenized collateral, including stablecoins, in derivatives markets.

• The CFTC, spearheaded by Acting Chairman Caroline D. Pham and its Global Markets Advisory Committee (GMAC), is actively seeking to expand the use of tokenized assets, like stablecoins, as collateral for derivatives contracts (futures, swaps).

• This move is framed as a key step in modernizing capital markets, aiming to increase efficiency and transparency in collateral management by leveraging Distributed Ledger Technology (DLT).

• The CFTC is actively inviting industry stakeholders to submit suggestions by October 20th, demonstrating a collaborative approach and building on previous plans for a non-cash collateral pilot involving major crypto firms like Circle and Ripple.

What’s Next: Industry submits feedback by Oct 20. The CFTC will then accelerate the stablecoin collateral pilot and issue initial regulatory guidance on stablecoin eligibility. This will require coordination with the Treasury on implementing the new stablecoin law.

Why it Matters: This move is a massive step toward legitimizing stablecoins by integrating them into the trillion-dollar derivatives market. It bridges TradFi and DeFi by using DLT to modernize slow collateral processes. It positions the U.S. CFTC as a leader in responsible digital asset innovation.

Our Take: This is a game-changer. The immediate winners are compliant stablecoin issuers and firms developing DLT infrastructure for clearing/collateral. The challenge is the CFTC swiftly establishing clear standards for stablecoin quality and risk management to prevent systemic risk. This is the institutional green light for stablecoins.

QUICK BITES

• RedotPay raised $47M.

• M2 invests $20M in Ethena.

• Tether seeks funding for $20B at $500B valuation.

• USDH goes live after Native Markets winning bid.

• Ethereum reclaims USDT lead with $80B supply, surpassing Tron.

• OKX offers 4.1% yield on USDG as stablecoin competition heats up.

• Ripple, Securitize bring RLUSD to BlackRock and VanEck tokenized funds.

• Nine European banks join forces to issue MiCa-compliant euro stablecoin.

• Hong Kong Monetary Authority warns against unregulated stablecoin issuance.

• Coinbase leads $14.6M round in Bastion as firm leans into stablecoin infrastructure.

YIELD OF THE WEEK

Midas mFARM: 24.37% APY

• mFARM is designed to track selected, diversified stablecoin yield strategies across various on-chain markets and ecosystems.

• Farm Capital is designated as the Risk Manager responsible for monitoring the strategy's performance and associated risks.

• Additional rewards from partners are converted and primarily distributed as claimable mFARM tokens to eligible users, with larger amounts used for purchasing and retroactively distributing mFARM. Smaller rewards are integrated into regular price updates.

Resupply sreUSD: 15.81% APY

• sreUSD (savings reUSD) is an interest-bearing token acquired by depositing reUSD, which continuously accrues yield from a share of the protocol's revenue.

• reUSD is obtained by supplying collateral like crvUSD or frxUSD to Curve Lend or Fraxlend markets and then borrowing reUSD, with leverage available to enhance the potential APY.

• The yield earned by sreUSD is automatically compounded, meaning the token's value increases over time, allowing users to withdraw a larger amount of reUSD than was initially deposited.

Avant savUSD: 20.67% APY

• savUSD is a yield-bearing token that appreciates in value relative to avUSD, and staking avUSD results in receiving a smaller but equivalent value in savUSD tokens.

• The savUSD TVL is continually growing, with 88% of all avUSD currently staked.

• Avant employs a fee structure based on net profits, which includes a 10% management fee and a variable performance fee for trading partners, ensuring fees are only applied when strategies are profitable. An additional fee is applied upon asset redemption.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.