The US Commodity Futures Trading Commission (CFTC) is the latest in a series of respected government bodies and regulators to voice proponency of Bitcoin, with Commissioner Mark Wetjen having spoken specifically of the benefits to the derivatives market that virtual currencies may bring.
On October 9, Commissioner Wetjen publicly stated at the Global Markets Advisory Committee Open Meeting that “Today we are discussing crypto-currency developments and how they relate to the commission and the markets we oversee. This is an important and timely discussion for two reasons.”
“First, there are a number of merchant businesses who now accept Bitcoin as payment for goods they sell. For many merchants, fluctuations in the value of Bitcoin have created a demand for a derivatives market that would allow for hedging against those fluctuations. Consequently, the commission already has been presented with one swap contract on Bitcoin by a registered SEF that has been listed for trading, and there are at least several other platforms already registered or soon-to-be registered that intend to list other Bitcoin-denominated contracts” stated Commissioner Wetjen.
New York State’s Superintendent of Financial Services Benjamin Lawsky provided Bitcoin’s foray into potential regulatory oversight in the United States, with the launch of the BitLicense, however the federal regulator is beginning to display its perspective that Bitcoin can enhance the global financial landscape.
“Today’s session will be helpful in educating the public and the commission on the various regulatory challenges that these novel contracts present” stated Commissioner Wetjen. “Only with additional understanding can the CFTC be confident that it can effectively execute on its mission of preserving the proper functioning of a crypto-currency derivative market, which includes enforcing rules intended to prevent manipulation of these markets. Again, we anticipate more instances in the near future where the commission will be asked to review contract design as well as consider the applicability of those core principles affecting trading venues when a crypto-currency-contract has been listed.”
In conclusion, Commissioner Wetjen explained that “The discussion will be relevant in helping the CFTC and the public better understand the potential benefits that Bitcoin or Bitcoin-like protocols and technology – as opposed to the crypto-currency itself – could bring to the derivatives marketplace. Settlement and other trustee-like services are at the core of the bitcoin-technology protocol. Any type of open-sourced, public-ledger technology seemingly could be useful in the derivatives space, where monies and collateral are frequently transferred and settled throughout a trading day. But again, the novelty of the technology and its applications in turn present novel policy questions for regulators, and the commission needs to be thinking about those questions today rather than tomorrow.”
For the full announcement from the CFTC, click here.