For years, the operational burden on OTC brokerages running pooled client accounts has been twofold: custody risk from assets held with intermediaries, and reconciliation overhead from maintaining parallel records across custodians, counterparties, and internal books. The second problem persisted even when blockchain-based settlement offered a technical solution, because regulatory defensibility required maintaining traditional records regardless of what the ledger showed.
That calculus changed on September 24. The CFTC's Market Participants Division, Division of Market Oversight, and Division of Clearing and Risk released updated FAQs confirming that registrants may use blockchain or distributed ledger technology to satisfy recordkeeping requirements under Regulations 1.31 and 45.2. The update adds four new questions to guidance first published in March, and directly addresses the compliance question that kept many regulated firms from treating on-chain records as authoritative.
The practical shift is significant. Firms subject to CFTC recordkeeping rules may now create and retain regulatory records directly on a blockchain without maintaining an additional off-chain copy solely because the records exist on-chain. For private or permissioned networks, the blockchain can serve as the primary recordkeeping system without parallel documentation. For public, permissionless networks, firms must still ensure records can be retrieved and provided to the CFTC if the network or a block explorer becomes unavailable, but the off-chain backup is a contingency measure, not a standing requirement.
This matters because CFTC Regulation 1.31, which governs books and records for registered entities, was designed to be technology-neutral. The Commission amended the rule in 2017 specifically to eliminate prescriptive technology requirements and provide flexibility as recordkeeping systems evolved. The September 24 guidance makes explicit what the technology-neutral framework implied: blockchain qualifies.
The update also addresses tokenized investments. Futures commission merchants and derivatives clearing organizations can now invest customer funds in tokenized versions of assets already permitted under Regulation 1.25, the rule governing how FCMs and DCOs may invest segregated customer funds. The condition is straightforward: the tokenized form must grant holders legal and economic rights equivalent to those attached to the traditional asset. Tokenized money market fund shares, for example, would qualify if they carry the same rights as their non-tokenized equivalents.
Chairman Michael Selig framed the guidance as part of the agency's broader effort to provide regulatory clarity for crypto-native market structures. The timing is notable. The update arrived nine days after the Senate failed to advance the Digital Asset Market Clarity Act, which would have established a comprehensive federal framework for digital assets. With legislation stalled, the CFTC is proceeding under existing authority, and the September 24 FAQ update demonstrates that existing authority is sufficient to accommodate blockchain infrastructure within the regulated derivatives system.
For operations and compliance teams at bilateral OTC brokerages, the implications are concrete. The reconciliation problem in pooled-account environments stems from the need to maintain consistent records across multiple systems: internal books, custodian statements, counterparty confirmations, and regulatory filings. Each system introduces potential for discrepancy. Each discrepancy requires investigation. The operational tax compounds with the number of counterparties and the frequency of settlement cycles.
Blockchain-based settlement addresses this by creating a shared, immutable record that all parties can reference. But that technical capability was previously undermined by regulatory uncertainty: if the blockchain record wasn't defensible as a regulatory record, firms still needed to maintain traditional documentation, which meant the reconciliation overhead persisted even when the underlying settlement moved on-chain.
The September 24 guidance removes that objection. A firm can now treat its blockchain records as the official regulatory record, subject to the standard requirements that records remain reliable, accessible, retained for the required period, and producible upon request. The five-year retention requirement under Regulation 1.31 still applies. The obligation to produce records promptly when the Commission requests them still applies. What no longer applies is the assumption that on-chain records require off-chain duplication for compliance purposes.
This does not eliminate custody risk, assets held with intermediaries still carry counterparty exposure. But it does change the analysis for brokerages evaluating whether blockchain-native settlement creates or reduces operational risk. The compliance blocker is gone. The question now is whether the settlement infrastructure itself delivers the transparency and efficiency that the reconciliation burden previously obscured.
The CFTC's guidance also signals regulatory direction. The agency has been building a framework for tokenized assets through a series of staff letters and FAQ updates since late 2025, covering tokenized collateral, margin assets, and now recordkeeping. The September 24 update fits a broader agenda that Chairman Selig has described as preparing for financial markets that will undergo more change over the next decade than they have in the previous several decades combined.
For compliance officers, the operational question is now separable from the regulatory question. The regulatory question has an answer: blockchain records satisfy CFTC recordkeeping requirements if they meet the same standards as any other electronic record. The operational question, whether to rebuild settlement infrastructure around that capability, remains a business decision. But it is now a decision that can be made on operational merits, without the regulatory uncertainty that previously skewed the analysis.
