Fed's Crypto Wake-Up Call: Tougher Margin Rules Target Wild Volatility

By suggesting that cryptocurrencies as a different asset class under uncleared derivatives regulations, the U.S. Federal Reserve has taken a major step toward including them in mainstream financial regulation. The Fed notes in a working paper issued early in 2026 that cryptocurrencies show significantly more price volatility than conventional assets, including stocks or commodities. With deficits calculated at 40–60% for major assets like Bitcoin and Ethereum, this unusual risk profile causes current frameworks—like the commonly used Standard Initial Margin Model (SIMM)—to greatly undervalue the possible losses.

To close these voids, the plan presents a personalized, dual-tier approach to risk weighting: considerably higher requirements for extremely volatile, unpegged cryptocurrencies than for more stable stablecoins. Additionally, calling for more robust protections, including stricter concentration limits on crypto exposures, more demanding stress testing, and explicit liquidity corrections in margin calculations. The objective is to more accurately depict the severe swings and tail risks that have long defined crypto markets, therefore guaranteeing banks and counterparties hold enough collateral against uncleared OTC derivatives.

For the sector, the ramifications are significant. Though the proposal doesn't alter the CFTC's commodity categorization of most cryptocurrencies, it sets more stringent margin requirements that could increase transaction costs and decrease OTC crypto derivatives market liquidity. Simultaneously, the decision denotes increasing regulatory acceptance of the permanency and validity of bitcoin inside the financial system. With any ultimate regulations scheduled to be rolled out slowly over many years, providing market players with the opportunity to adjust, a public comment period is now available.