Bitcoin.

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The Commodity Futures Trading Commission (CFTC) is a separate government organization in charge of the derivatives markets. </strong>The main objective is to include the development of ambitious and competitive markets, as well as the defense against fraud, manipulation, and unfair commercial practices.</p>\n<p>At the time when Commodities Futures Modernization Act, which took place in 2000, was passed, the Commission's role was enlarged to include the development of a cooperative regulatory system for single-stock futures in collaboration with <strong>the Securities and Exchange Commission (SEC).&nbsp;</strong></p>\n<p>Also, the CFTC has shifted to offer extra control to the dollar swaps market after the 2008 financial disaster and the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.</p>\n<p>It was 2014 when the CFTC revealed that there is a debate about whether it should manage Bitcoin. Since then, it has taken the position <strong>that Bitcoin is a commodity under the Commodity Exchange Act.</strong></p>","level":"easy","meta_title":"What is Commodity Futures Trading Commission (CFTC)? Definition & Meaning | Crypto Wiki","meta_description":"Commodity Futures Trading Commission (CFTC) meaning: Commodity Futures Trading Commission (CFTC) - is a separate government organization in charge of the derivatives markets.","meta_keywords":null,"language":"en","created_at":"2022-02-23T15:29:05.000000Z","updated_at":"2022-05-13T14:32:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-commodity-futures-trading-commission-cftc"},"prevSection":{"id":187,"original_id":null,"author_id":40,"translator_id":null,"title":"What are Collateral Tokens?","slug":"what-are-collateral-tokens","section":"C","keyword":"Collateral Tokens","status":"published","definition":"tokens that can cover at least a portion of a loan.","content":"<p>Collateral tokens serve as a risk-reducing commodity for lenders when borrowers apply for a crypto loan. <strong>The term is also used in</strong> <strong>traditional banking.</strong></p>\n<p>For instance, if you wish to purchase a new vehicle and take out a mortgage, you are basically pledging it as collateral if you are unable to repay the mortgage.</p>\n<p>Also, if you want to borrow cryptocurrency and the lender wants to reduce the risk, they might want collateral. <strong>The interaction takes place</strong> <strong>on the blockchain.</strong> Borrowers contribute a certain amount of one token in order to get a certain quantity of another token, such as <a href=https://www.bitdegree.org/"/crypto/buy-ethereum-eth/">ETH or <a href=https://www.bitdegree.org/"/crypto/buy-bitcoin-btc/">BTC.

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Crypto lenders certainly confront high-risk issues, and collateral tokens are an adequate solution. <strong>Lenders acquire sufficient security if the deposit is made in collateral tokens</strong>, which means that, if a defaulted loan case arises, they will be compensated in some way.</p>\n<p>Moreover, crypto fans may also use their collateral tokens to pay in <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-fiat/">fiat for products and services. This degree of adaptability is quite useful for cryptocurrency investors, as it provides them with a varied portfolio that can be used on a regular basis.</p>\n<p>There are several collateral tokens available. <strong>The COLL token</strong> is one of the most well-known collateral tokens. It was intended to permit holders to pay for goods and services in fiat using funds borrowed upon their COLL holdings.</p>\n<p>No one questioned the need for a contemporary, blockchain-based loan system after decentralized finance first emerged. Hence, collateral tokens made it possible. Of course, lending banks did already have security collateral and the cryptocurrency industry was way behind &mdash; but only in the beginning.</p>","level":"easy","meta_title":"What are Collateral Tokens? Definition & Meaning | Crypto Wiki","meta_description":"Collateral Tokens meaning: Collateral Tokens - A collateral token is one that can cover at least a portion of a loan.","meta_keywords":null,"language":"en","created_at":"2022-02-23T15:04:17.000000Z","updated_at":"2022-09-22T10:50:26.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-are-collateral-tokens"},"currentChapter":"C","currentSection":"what-is-collateralized-debt-obligation","chapterTitle":"C","readingLevel":"medium"},"url":"/crypto/learn/crypto-terms/what-is-collateralized-debt-obligation","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0">

Crypto Terms: Letter C

What is Collateralized Debt Obligation?

Collateralized Debt Obligation MEANING:
Collateralized Debt Obligation - (CDO) is a complex financing mechanism supported by a pool of loans and other assets.
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Let's find out Collateralized Debt Obligation meaning, definition in crypto, what is Collateralized Debt Obligation, and all other detailed facts.

A collateralized debt obligation is marketed to investment firms.

Drexel Burnham Lambert, a former investment organization, first presented CDOs on the US financial scene in 1987. However, it did not garner as much attention until 2008. Collateralized debt obligations (CDOs) picked up steam, with sales nearly doubling from $30 billion in 2003 to $225 billion in 2006.

In other words, it is a mixture of several other, smaller loans which are repacked based on the level of credit risk, and suggested for institutional investors. The smaller loans can be anything from student loans, and mortgages, to bonds.

The time frame between 2003 and 2008 was when the majority of CDOs that were sold were comprised of mortgage-supported securities, which was way riskier. Therefore, many CDOs began to significantly lose their worth when more and more people were forfeiting their mortgages.

When the housing market collapsed in the United States, CDOs surrendered their place as one of the most favored derivative investment choices. Nonetheless, banks continue to employ them on a somewhat lesser level to produce liquidity relatively quickly.

To be fair, the main focus of CDOs is to mix a specific amount of loans into a bigger asset. The asset is resold to a bigger investment company at the end. In this case, individuals or organizations who originally surrendered the loans will get a lump sum of money. The new investor, on the other hand, will gain the loans and the collateral among them.

Properties, cars, and commodities can be a form of collateral that is given to a lender so the borrower could take out a loan. The collateral in the context of collateralized debt obligations is frequently a vehicle or a piece of real estate. Banks generally manufacture CDOs, which are subsequently sold to institutional investors.

In a scenario where banks choose a composition of loans and assets for CDOs, they are searching for ways to develop a balanced ratio between risk and reward.

A CDO can be made up of a wide range of assets. For instance, mortgage-backed securities are made up of mortgage loans. Asset-backed securities, on the other hand, are made up of business and private debt, credit card debt, and auto leases and loans. 

Any of these loans and financial obligations can be included in a CDO.

Considering their part in the financial crisis, collateralized debt obligations are still a popular investment option in structured finance. CDOs are still in use because they are fundamentally a mechanism for moving risk and freeing up capital.