The U.S. Commodity Futures Trading Commission (CFTC) published a “Request for Input” (RFI) last December, seeking public feedback on Ethereum, its technology and the markets around it.
ErisX, a Chicago-based cryptocurrency exchange, has filed its comments in response to the CFTC request via a letter published on February 15.
The ErisX platform is a reboot of the Eris Exchange, which specialized in the traditional futures market. The new platform recently announced that it would launch support for crypto spot trading, offering Bitcoin (BTC), Ethereum and Litecoin (LTC).
The platform is also awaiting regulatory approval before it also rolls out futures contracts, with these offerings targeted for release by the second half of 2019.
The exchange’s letter contains the exchange’s views concerning the question of ether derivatives and how they might impact the market and the Ethereum network.
Specifically, Eris states that introducing regulated ether futures contracts “would have a positive impact on the growth and maturation of the market.”
According to the letter, the ErisX team believes that having ETH futures listed and traded “compliantly” on markets regulated by the CFTC is possible. Per the exchange, this would be “consistent” with the U.S. regulator’s efforts that seek to promote best practices in the derivatives trading markets.
On its part, the CFTC has sought to have a market that is “open, transparent, competitive, and financially sound,” and one that protects against potential fraud and manipulation, among other harmful practices.
The commodity markets watchdog previously noted that Bitcoin (BTC) is a commodity and not a security, basing its determination on the fact that bitcoin’s use is targeted at replacing traditional sovereign currencies.
The same assessment wasn’t extended to Ethereum, but a senior officer with the Securities and Exchange Commission (SEC) stated in June last year that Ethereum wasn’t security.
ErisX notes in its comment that the distinction between Ethereum and Bitcoin is a conceptual one, adding that the former is “built upon some of the architectural principles of Bitcoin.”
However, ethereum has extended the top crypto’s functionality by including new computational capabilities that allow for the “execution of arbitrary code.”
The exchange’s assessment of the crypto (and Ethereum’s) market notes that regulated enterprises have largely kept off the sector due to regulatory uncertainty and lack of clarity from regulators.
According to the exchange, this has led to an influx of off-shore ‘exchanges’ or ‘brokers’ that seek to fill the void, with many of them either “unregulated or lightly regulated.”
The scenario, the platform added, is responsible for the associated risks that the market faces, including wild price volatility and illiquidity.
However, these challenges are “not unique to Ether,” but are largely exacerbated by the fragmentations within the market that has a proliferation of trading platforms and ‘exchanges’ that lack in transparency and integrity.
The ErisX letter points out that the availability of CFTC-regulated Ethereum derivative products has the potential to draw institutional and other commercial users to the crypto market. The exchange notes that this would result in markets becoming “more robust, liquid, and resilient.”
In the end, the market will benefit from accurate prices, better risk management, and improved trading efficiency.
ErisX recently hired three more execs to its team, with one of the new C-Suite hires being a former Barclays executive. Robert Thrash joined the team a month after ConsenSys chief Joseph Lubin joined the platform’s board of directors.
Rival platform SeedCX launched its spot trading marketplace in January, while ICE’s Bakkt is expected to launch later on in the year.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.