CRYPTO MOVERS AND PRICES
CRYPTO STORY OF THE DAY
Late Last Week, There Was Plenty Of Noise Around The Potential Approval Of A Physically Settled Bitcoin Future - LedgerX, In Fact, Announced That They Were The First To Have, Had The Product Approved Before The CFTC Denied Their Claim - We Generally Believe That The Focus Around A Physically Settled Bitcoin Future Is Misguided - We Provide Details And Analysis
Last Wednesday, in both a conversation with CoinDesk and in a podcast, LedgerX executives announced they had been the first to have a physically-settled Bitcoin future approved by the CFTC. This would have seen them beat prospective providers Bakkt and ErisX to the offering. Then, in a strange turn of events, the CFTC contacted CoinDesk on Thursday saying that they had not in fact approved LedgerX to offer a physically-settled Bitcoin future. After some preliminary backtracking LedgerX CEO Paul Chou took to Twitter and angrily claimed he would be suing the CFTC on the basis of anti-competitive behaviour. LedgerX and its executives do not appear to have made statements on the matter since.
Crypto Takeaway: We have long held a different opinion than those prospective providers about the value of a physically-settled Bitcoin future. We believe that cash-settled crypto derivatives are much more important to institutional adoption as they allow a class of investor who is not able to hold physical crypto (for reasons regulatory or operational) to participate in the space. Furthermore, we have argued that getting an ingrained product, such as a future, approved, would be a particularly difficult regulatory hurdle. US regulators already have two favored futures providers in the CME and CBOE. Allowing one additional firm to operate would effectively greenlight others to follow which would add administrative burden to the regulator only for a currently small asset class like crypto. Mr. Chou's comments that the CFTC is acting anti-competitively, seem to echo that roadblock and also helps to explain the drawn-out regulatory delays of some of the other prospective Bitcoin futures platforms.