CFTC collateral rule change could boost tokenized MMF

The Commodity Futures Trading Commission (CFTC) has finalized a rule change allowing a broader range of money market funds (MMFs) to serve as initial margin for uncleared swaps. Previously, MMFs utilizing reverse repo, repo, or securities lending were excluded from collateral eligibility, despite these instruments being standard for government MMFs under SEC Rule 2a-7. By removing these restrictions, the CFTC acknowledges the low-risk nature of reverse repo transactions, which involve lending cash against government securities. This shift is significant for the RWA market because it directly facilitates the use of tokenized MMFs as collateral in the massive OTC derivatives sector. With US MMF participation in Treasury repo transactions reaching approximately $1.7 trillion as of October 2025, the potential for tokenized assets to capture this liquidity is substantial. The Commission notably declined to impose additional caps or clearing requirements on these repo activities, providing a clear regulatory path for adoption. This development marks a critical step in integrating tokenized financial products into the institutional margin ecosystem, though cleared margin eligibility remains a separate regulatory hurdle.