Fed Proposes Treating Crypto as Distinct Asset Class for Derivatives Margin Rules

Federal Reserve researchers published a working paper on February 11, 2026, recommending that crypto assets be removed from traditional SIMM categories and assigned their own risk weights for uncleared derivatives margin requirements.

The proposal separates floating cryptocurrencies like Bitcoin and Ethereum from pegged stablecoins, and introduces a 50/50 benchmark index to calibrate volatility-driven collateral levels. This marks the first formal acknowledgment by the U.S. central bank that crypto’s price behavior cannot be modeled alongside equities, FX, or commodities. Combined with December’s reversal of anti-crypto banking guidance, the paper signals a strategic shift: the Fed is no longer sidelining crypto—it is building the guardrails to contain it.

Why the Fed Says Crypto Doesn’t Fit the Old Boxes

For decades, the Standardized Initial Margin Model has served as the industry benchmark for calculating how much collateral counterparties must post when trading uncleared derivatives. It sorts assets into neat compartments: interest rates, equities, foreign exchange, commodities. Each bucket carries calibrated risk factors based on decades of historical data.

Crypto broke the model.

In a working paper published Wednesday, Federal Reserve researchers Anna Amirdjanova, David Lynch, and Anni Zheng laid out the problem in plain terms. Bitcoin and its peers do not behave like stocks. They do not track currency pairs. Their volatility cannot be explained by the same supply-and-demand mechanics that govern oil or wheat.

The authors concluded that forcing crypto into existing SIMM categories produces systematic underestimation of risk. When an asset can drop 30% in a week and rally 40% the next, a model built for 2% daily moves is not conservative—it is dangerous.

Floating vs. Pegged: A New Binary for Crypto Risk

The paper’s most concrete proposal is a clean taxonomic split. On one side: floating cryptocurrencies. The Fed explicitly names Bitcoin, Ether, Binance Coin, Cardano, Dogecoin, and XRP as examples . These are assets with no peg, no algorithmic target, no issuer promising stability. Their price is whatever the market says it is, second by second.

On the other side: pegged cryptocurrencies. This means stablecoins—assets designed to maintain a fixed value, typically against the U.S. dollar. The researchers acknowledge that not all stablecoins are created equal, but they argue that as a class, pegged assets exhibit fundamentally different volatility profiles than their floating counterparts.

The implication is significant. Under this framework, a derivatives trade collateralized by USDC would attract a different margin requirement than one collateralized by Bitcoin, even if the notional exposure is identical. Risk is no longer aggregated under a single “crypto” banner; it is disaggregated by mechanism design.

The Benchmark Index Solution: 50% Floating, 50% Pegged

Classification alone does not solve the calibration problem. Regulators still need a way to translate crypto’s chaos into a defensible number. The Fed researchers propose building a benchmark index composed of equal weights of floating digital assets and pegged stablecoins .

This index would function as a proxy variable for the entire asset class. By tracking its historical volatility and autocorrelation, institutions could derive “calibrated” risk weights specific to crypto—weights that update as market conditions change, rather than remaining static for years.

The choice of a 50/50 split is deliberate. It forces the index to reflect both the speculative energy of unpegged tokens and the stability-seeking behavior of stablecoin markets. Neither dominates; both contribute to the final signal.

For a trader opening a large Bitcoin swap position with a bank, this could mean posting significantly more initial margin than current models require. But it also means that margin is calculated based on empirical crypto volatility, not a blunt instrument borrowed from equity markets.

What Are Uncleared Derivatives and Why Margin Matters

To understand why this proposal matters, you have to understand the distinction between cleared and uncleared trades.

Cleared derivatives pass through a central counterparty—a clearinghouse that stands between buyer and seller, guaranteeing performance and mutualizing default risk. Uncleared derivatives trade directly between two parties, typically banks, hedge funds, or sophisticated institutions. There is no central guarantor. If one side fails to pay, the other absorbs the loss.

Initial margin is the collateral posted at the start of such a trade. It is not a prepayment; it is insurance. If the trade goes against the counterparty and they cannot meet the variation margin call, the initial margin is there to cover the loss.

Because crypto is more volatile, the potential gap between trade inception and default is wider. A position that is safely overcollateralized at 10 AM can be underwater by noon. The Fed’s paper argues that margin models must account for this velocity of risk. Waiting for monthly recalibration is not sufficient.

December’s Signal: From Restriction to Integration

The working paper did not emerge from nowhere. It follows a decisive policy reversal in December 2025, when the Federal Reserve rescinded its 2023 guidance that had effectively walled off the banking system from crypto activity .

That earlier guidance subjected any bank engaging in crypto-related activities to heightened scrutiny and presumption of unsafety. The December reversal erased that presumption. Banks supervised by the Fed are now permitted to participate in crypto markets under the same general principles that govern any other novel activity.

The Fed also floated the concept of “skinny” master accounts—streamlined access to the central banking system for crypto firms, albeit with fewer privileges than full-service banks enjoy . This is not yet policy, but it is on the table.

Taken together, the signals are consistent. The Fed is no longer trying to keep crypto outside the perimeter. It is designing the perimeter to include crypto, with higher fences where needed.

Key Numbers from the Fed’s Proposal

• SIMM asset classes: 4 (interest rates, equities, FX, commodities) — none fit crypto
• Floating assets named: Bitcoin, Ether, BNB, Cardano, Dogecoin, XRP
• Pegged asset class: Stablecoins
• Benchmark index composition: 50% floating / 50% pegged
• 2023 guidance status: Reversed December 2025
• Master account proposal: “Skinny” accounts under consideration

Who Are the Authors?

Anna Amirdjanova, David Lynch, and Anni Zheng are not setting policy. Their working paper carries the authority of the Federal Reserve Board’s research staff, but it is not a rule, not a proposal for a rule, and not even an advance notice of a proposal. It is analysis.

Yet in the world of financial regulation, staff analysis often becomes the intellectual foundation for future rulemaking. The SIMM model itself emerged from years of collaborative work between regulators and the International Swaps and Derivatives Association. This paper is best read as the opening sketch of what a crypto-specific margin framework could look like.

Amirdjanova’s background is in mathematical finance and statistical modeling. Lynch and Zheng bring expertise in risk methodology and derivatives infrastructure. Their names will appear in footnotes for years if this framework is adopted.

What This Means for Institutions and Traders

For banks and broker-dealers, the proposal signals that U.S. regulators expect them to treat crypto counterparties with distinct, documented risk models. Relying on internal equity volatility surfaces for Bitcoin positions may no longer pass supervisory scrutiny.

For institutional traders, higher margin requirements translate to higher cost of capital. A trade that required $1 million in collateral under an equity-based model might require $1.5 million or more under a crypto-specific calibration. This reduces leverage and compresses returns—but it also reduces the probability of forced liquidation cascades.

For crypto-native firms seeking banking charters or master accounts, the paper offers a path. The Fed is demonstrating that it understands the asset class well enough to differentiate between a Dogecoin and a dollar peg. That granularity is a prerequisite for serious integration.

Four Takeaways from the Fed’s Crypto Margin Shift

SIMM has reached its limit. Crypto cannot be force-fitted into categories designed for interest rates and corn futures. A new model is required.

Volatility is not a bug; it is the input. The Fed’s approach does not penalize crypto for being volatile. It simply insists that the margin reflect the volatility that actually exists.

Stablecoins are not Bitcoin. The floating/pegged distinction is the first formal regulatory acknowledgment that these assets serve different functions and carry different risks.

Integration is underway. Reversing the 2023 guidance was the political signal. This paper is the technical signal. The plumbing is being built.

The Federal Reserve is not endorsing crypto. It is preparing for a future in which crypto exists alongside traditional markets and must be managed, not ignored. That is a subtle but profound shift. For an institution built on caution, building better margin models is the highest form of acknowledgment.