CFTC Opens a Settlement Path for Digital Asset Trust Companies

A Commodity Futures Trading Commission (CFTC) no-action letter may make it easier for derivatives clearing organizations (DCOs) to incorporate digital assets into their settlement and collateral workflows.  The no-action letter reflects a broader trend towards accommodating state-chartered trust companies within the federal financial regulatory framework. The SEC recently proposed a rule-based pathway under which investment advisers and regulated funds could use qualifying state trust companies to custody certain crypto assets, subject to due diligence, segregation, audited financial statements, internal control reports and related safeguards.¹

In CFTC Letter No. 26-30, the Division of Clearing and Risk stated it would not recommend enforcement action against “any DCO for using a trust company to conduct daily settlements with clearing members, if the DCO treats the trust company as if it were a settlement bank” for purposes of compliance with CFTC Regulations 39.14(c) and (d).²

The relief addresses an important mismatch between existing CFTC regulation and the digital asset market infrastructure currently being developed.

Extending the Settlement Bank Framework to Trust Companies

Although trust companies may generally hold customer funds under the CEA and CFTC regulations, CFTC Regulation 39.14 does not expressly authorize DCOs to use trust companies for daily settlement. Instead, Regulation 39.14 defines a “settlement bank” as a “bank that maintains an account either for the [DCO] or for any of its clearing members.”³

The CFTC Letter No. 26-30 bridges this gap. Under the terms of the letter, a DCO may use a trust company for daily settlement if it applies the same safeguards that would govern its use of a conventional settlement bank. Those safeguards include maintaining appropriate selection criteria, monitoring the institution’s financial and operational reliability, managing concentration and related risks, and structuring the arrangement to ensure settlements are completed promptly when due.

Thus, the letter does not relax the risk management requirements in Regulation 39.14. The letter simply permits those requirements to be applied to a different type of regulated financial institution.

Why the Relief Matters for Digital Assets

The no-action relief provided in CFTC Letter No. 26-30 matters most for digital assets. Many specialized digital asset custodians operate under state trust charters rather than traditional bank charters, and the settlement bank framework in Regulation 39.14 left no clear role for them in DCO settlement. Nodal Clear, LLC made this point in its request. It represented that state-regulated trust companies are among the leading custodians of digital assets and that permitting DCOs to use them for daily settlements could allow DCOs to bring digital assets into existing workflows for collateral movement.⁵

The relief, which extends to any DCO and not only to Nodal Clear, LLC, creates a pathway for a DCO to (i) maintain digital assets with a state-regulated trust company, (ii) use that institution in settlements with clearing members, and (iii) hold and transfer digital assets as part of the ordinary settlement infrastructure. The CFTC’s no-action relief also reflects a focus not only on an institution’s charter, but on whether the DCO subjects that institution to appropriate selection, monitoring, and risk controls.⁶

CFTC Letter No. 26-30 offers a glimpse of how the existing DCO clearing framework may evolve to accommodate digital asset collateral. It demonstrates that specialized custodians, such as trust companies, can operate within regulated settlement systems without weakening existing regulatory safeguards, and thus may prove to be a first step rather than a narrow accommodation.