The U.S. Commodity Futures Trading Commission (CFTC) said today it will officially allow three exchanges to self-certify bitcoin-based futures contracts. The move opens potentially lucrative new channels for bitcoin investment — sending the BTC price soaring in response.
The announcement was welcomed by bitcoin bulls — BTC jumped from a Nov 30th slump below $9,300 USD back to over $10,800 on CoinMarketCap at press time, once the news started to spread.
‘Enhancements’ Needed to Introduce Bitcoin Futures to Mainstream Investors
The new products promise to bring in new investors who want to trade on bitcoin value but aren’t comfortable with holding or securing the actual currency.
In a statement posted online, the CFTC said the Chicago Mercantile Exchange Inc. (CME), the CBOE Futures Exchange (CFE) and the Cantor Exchange have all implemented changes that satisfied the regulator’s requirements for approving such a radical new asset class.
Chairman J. Christopher Giancarlo said:
“Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past. As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets.”
It cautioned that the underlying cash markets and exchanges for bitcoin remain mostly unregulated and beyond the CFTC’s control.
“In working with the Commission, CME, CFE and Cantor have set an appropriate standard for oversight over these bitcoin contracts given the CFTC’s limited statutory ability to oversee the cash market for bitcoin,” Giancarlo said.
CME wasted no time in announcing its self-certification, saying bitcoin futures trading starts on December 18th:
— CMEGroup (@CMEGroup) December 1, 2017
Contracts Settled in Dollars, Not Bitcoin
Futures contracts will be settled in cash; holders will receive the market value of bitcoin in dollars at the end of their contracts, not cryptocurrency.
CFTC representatives spent months in discussions with the three exchanges to improve contract design, security and (perhaps most importantly to the government) surveillance. Commission staff will also monitor and analyze the progress of bitcoin futures trading after introduction.
The regulator will also watch associated bodies like designated contract markets, derivatives clearing organizations (DCOs), clearing firms and individual traders involved in trading and clearing bitcoin futures. Additionally, it will work with the National Futures Association (NFA) and assist it in communicating information about the new products with members.
Although CME announced its intention to introduce a bitcoin futures product starting December, nothing was 100 percent certain until the CFTC gave the green light. As recently as two days ago, Bloomberg reported that approval still wasn’t guaranteed.
Is this good news for Bitcoin in general, or just the price? Let’s hear your thoughts in the comments.
Images via CFTC, Blue Diamond Gallery, Pexels