Key Takeaways
- Crypto.com has secured a full house of CFTC licenses.
- The exchange can now offer margined derivatives products without relying on the CME.
- Opening up the U.S. market to leverage trading is a victory for Trump’s pro-crypto agenda.
Crypto.com has become the first American crypto exchange to secure a full house of licenses from the U.S. Commodity Futures Trading Commission (CFTC).
With the latest amendment to its designated contract market (DCM) license, announced on Tuesday, Sept. 30, the company can now offer the full range of derivatives services to users.
Understanding CFTC Licenses: FCM, DCM, and DCO
The CFTC regulates derivatives markets through a series of licenses, each with distinct roles and regulatory obligations.
The three core categories are: Futures Commission Merchants (FCMs), Designated Contract Markets (DCMs), and Derivatives Clearing Organizations (DCOs).
FCMs act as brokers between customers and futures markets. They can solicit or accept orders for futures, options on futures, and swaps, while holding customer margin funds in segregated accounts.
Meanwhile, DCMs are CFTC-licensed exchanges where futures and options are listed for trading. However, they can’t operate without a clearinghouse. Every contract they list must be cleared through a registered DCO.
Finally, DCOs function as clearinghouses. They are responsible for guaranteeing trades, managing margin, and mitigating counterparty risk.
The three-pronged licensing framework is designed to limit conflicts of interest and ensure fair play. FCMs connect customers, DCMs list contracts, and DCOs clear them. No single entity can perform all functions without separate approvals.
Crypto.com’s Journey to Full-Stack Derivatives Exchange
Like other exchanges, Crypto.com’s journey to CFTC regulation has unfolded over the course of several years
In March 2022, the company obtained initial DCM/DCO registrations through its acquisition of Nadex. However, these only permitted it to offer 100% collateralized positions—no leverage or credit exposure allowed.
With the latest amendment, however, crypto.com can legally offer margined futures to American users, making it the first retail-focused exchange able to do so.
Crypto Leverage Return From the Wilderness
In the mid-2010s, the CFTC started to crack down on unregistered exchanges offering margin contracts on crypto. This led most platforms to pull derivative products from the U.S. market, leaving few routes for traders to access them.
Initially, CME Group maintained a monopoly on regulated margin contracts for Bitcoin and Ether. But these were mainly aimed at large, institutional players, with a standard contract size of 5 BTC or 50 ETH.
The firm plans to introduce XRP and Solana derivatives on Oct. 13.
In 2021, CME introduced “micro-contracts (0.1 BTC or 0.1 ETH each) to make crypto futures more accessible. And until this year, they served as the default route for brokers to offer leverage on crypto to U.S. traders.
However, with the introduction of perpetual-style futures trading in July, Coinbase became the first U.S. crypto exchange to break CME’s monopoly on regulated margin trading.
Crypto Regulation Under Trump
The return of margined derivatives to U.S. crypto exchanges reflects the more welcoming regulatory environment they face under the Trump administration.
Under previous leadership, the CFTC handed out a string of fines and warning against that saw major exchanges like Binance and Bitfinex exit the U.S. market entirely. Meanwhile, even companies that tried to play by the book encountered insurmountable regulatory hurdles.
Crypto.com’s achievement indicates a new era may be emerging for American crypto, in which exchanges are properly licensed rather than excluded from the realm of regulated finance.
“We sincerely appreciate the partnership with Acting Chairman Pham and the CFTC, who are working hard to carry out the crypto agenda of President Trump,” CEO Kris Marszalek said in a press release.
Going forward, Crypto.com can design and offer its own leveraged contracts, and the exchange said it will announce the details of a new suite of margined products soon.
Moreover, unlike Coinbase, which doesn’t operate its own clearinghouse, Crypto.com will be able to run the entire trade-clearing-margin loop in-house.
“Today marks a historic day for our company,” Chief Legal Officer Nick Lundgren proclaimed.
Crypto.com “has been building a robust exchange and clearinghouse for multiple products and we are excited to head to the launch of our margined derivatives,” added Global Head of Capital Markets, Travis McGhee.
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James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
