BitOoda Regulatory Analysis, 12/17/20: Regulated Crypto Derivatives Landscape Takes Huge Leap Forward
We at BitOoda were thrilled to see yesterday’s announcement by CME that the regulated exchange will list an Ethereum futures product next year. This is a huge step forward for the entire digital asset ecosystem and represents yet another indication of the migration of market activity toward regulated and registered platforms and players. The introduction of the financially-settled contract (50 ETH per contract, pricing based on the CME’s regulated reference rate) follows the explosion of interest this year in the platform’s Bitcoin futures and options and new all-time price highs for BTC.
· With the acceleration of regulatory enforcement against unregulated platforms (such as BitMEX), the expansion of the regulated derivatives market in the U.S. signals the continued advancement and maturation of the U.S. market landscape. CME ETH futures will enable BitOoda to offer a broader array of opportunities for our clients to gain exposure to digital assets in a risk-managed approach that will allow us to structure even more sophisticated strategies.
· As institutional investment interest continues to skyrocket — the latest being yesterday’s news that Alan Howard-backed hedge fund One River will build $1 billion in BTC and ETH holdings in 2021 — we are now seeing the quicker growth of financial infrastructure and product offerings to meet that demand. The S&P this month also announced it will launch cryptocurrency indices in 2021, which we feel could address a longstanding concern among some regulatory leaders about the need for reliable price discovery mechanisms.
The growth of institutional adoption and the structural market development being driven by that growing engagement will face a new set of regulatory counterparts in 2021, with CFTC Chair Heath Tarbert, SEC Chair Jay Clayton, and SEC enforcement head Stephanie Avakian all announcing their resignations. However, as we approach 2021 and the start of the Biden administration, we remain optimistic that the U.S. regulatory environment will continue to evolve in a way that permits this growth to continue: SEC Commissioner Hester Peirce continues to voice pro-crypto positions, SEC’s FinHub was recently escalated to be an independent office, we expect the CFTC’s forward-leaning principles-based approach to regulating digital asset derivatives will continue, and a cohesive cadre within Congress continues to advance the crypto agenda on Capitol Hill despite the recent emergence of a small group of congressional crypto naysayers.
We encourage our clients to reach out (email@example.com) and work with us to pursue new strategies and opportunities in light of the introduction of CME Ether futures.