The launch of Bitcoin futures contracts is prompting US regulators to reconsider their hands-off approach to new derivatives products.
On Wednesday, the Commodity Futures Trading Commission (CFTC) — the top US derivatives regulator — will hold a public meeting to discuss the self-certification process by which exchanges are allowed to list new products without prior approval from the CFTC.
As CCN reported, Chicago derivatives exchanges CBOE and CME used the self-certification process to fast-track the launch of their Bitcoin futures products, which were listed in December following months of anticipation. Other exchanges, including Nasdaq, are reportedly planning to launch cryptocurrency-based futures products as well.
Both CBOE and CME consulted with the CFTC before self-certifying the products, but the commission was nevertheless criticized by many market participants — including the Futures Industry Association — for not exercising a stricter posture toward these nascent products.
At Wednesday’s meeting, which will be chaired by Commissioner Rostin Behnam, the CFTC will review how it approaches the oversight of new products.
“The Commission must reconsider its historical regulatory approach to new products,”. Behnam plans to say at Wednesday’s meeting, according to The Wall Street Journal.
Previously, CFTC Chairman J. Christopher Giancarlo acknowledged that the CFTC should eye cryptocurrency derivatives with more scrutiny, and he said the agency has implemented a “heightened review” process that exchanges must undergo before they can launch cryptocurrency derivatives in the future. However, he also said that he hopes “the market impact of Bitcoin futures” does not “compromise the product self-certification process that has served so well for so long.”
The WSJ report notes that substantially altering the self-certification process would require Congressional action, which is not likely to occur at any point in the near future.
Despite criticism of the Bitcoin futures roll-out, the markets have operated in an orderly manner, and both exchanges have settled the first round of expiring contracts without incident.
At least one top Democrat on the Senate Agriculture Committee has expressed a desire to strengthen the CFTC’s ability to combat alleged fraud in the Bitcoin markets, but Republicans — who control all three branches of the federal government — have resisted calls to expand the authority of regulators.
“So far, it appears that the CFTC’s principles-based regulatory standards and the self-certification process have operated as intended,” House Agriculture Committee Chairman Mike Conaway (R-TX) said. “At this point it is still early and is unclear what, if anything, needs to be changed to improve the process.”
“Considering we are already seeing exciting potential uses for distributed ledger technology in agriculture trade, I am hesitant to encourage the government to look for ways that could potentially stifle further innovation,” added Senate Agriculture Committee Chairman Pat Roberts (R-KS).
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