The Commodity Futures Trading Commission (CFTC), seems to be willing to oversee Ethereum-based futures contract. The senior official chose to remain anonymous because the agency “doesn’t do bold pronouncements” said:
“A derivatives exchange comes to us and says ‘we want to launch this particular product.’ … If they came to us with a particular derivative that met our requirements, I think that there’s a good chance that it would be [allowed to be] self-certified by us.”
John Todaro, director of digital currency research at financial software provider Tradeblock says that many funds have mandates that do not allow them to buy the digital currency underlying:
“Further, a cash-settled futures contract, paid out in fiat rather than the underlying crypto, would allow hedge funds and the like to gain exposure to ether without worrying about custody (which has been a bottleneck to institutional investment).”
He added that in the long run, a CFTC-supervised futures market could usher in confidence among regulators such as the SEC which could pave the way for an ETF, an exchange-traded fund bringing additional liquidity to ether.
that's a sentence i thought i'd never say pic.twitter.com/cVE80mC6eT
— Josh HODLonautszewicz (@CarpeNoctom) May 6, 2019
The decision to grant an ETH-based futures contract wouldn’t be anything unusual because, just to remind you, the CFTC has already approved derivatives contracts tied to bitcoin, its much larger peer.
In December 2017, the Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange (CME) both launched their own version of a bitcoin futures contract. Back in March, CBOE announced it does not intend to list any additional Bitcoin futures beyond June but didn’t close the door completely on the digital asset class.
Also, an Ethereum based derivate contract will improve the price discovery characteristics of Ethereum and moreover increase investor confidence in this cryptocurrency. It also highlights the greater degree of decentralization on Ethereum due to its early adoption and a ubiquitous GPU mining protocol.
CFTC Chairman, Christopher Giancarlo, who has spoken about crypto in front of the United States Senate before, has made statements that suggest he is in favor of crypto – while not wishing for stringent regulation that might stifle innovation. He said:
“In addition to U.S. clearinghouses, the Commission has six registered clearinghouses located overseas and exempted four foreign clearinghouses. The Commission anticipates new applications for clearinghouse registration resulting from the explosion of interest in cryptocurrencies; an area in which protection of the cryptocurrencies will be one of the highest risks.”
ETH Prices Up to $200?
The reaction came fast and furious. Ethereum was pretty inactive until recently, especially if we compare it to Bitcoin which cranked out a 30 percent gain in April alone. Ethereum has barely managed this since the beginning of the year.
From a low of $160 around 14 hours ago, Ethereum price shifted gear and surged 12.5% to reach $180 within 12 hours. Daily volume has climbed from $5.8 billion to $8.5 billion which has pushed ETH market cap up to $19 billion.
This is now $6 billion clear of XRP in third place which has also been extremely bearish in recent months. At the time of writing Ethereum is up 9,78% to its high of $176.43. Will it go to $200, that’s what everybody’s waiting for.
As expected, ETH blasted through that key inflection point of $170 on above-average volume and was rejected at the next fib resistance level of $176.
— Joe McCann (@joemccann) May 6, 2019
Ethereum to Die a Slow Death Instead?
The Ethereum network has been constantly attacked by industry leaders who believe the platform doesn’t have much staying power. Some are arguing whether ether is money or not and some of them believe the protocol will die a slow death via economic abstraction.
In crypto speak, economic abstraction refers to gas payments made in a non-ETH asset, which would eventually contribute the coin become outdated and practically worthless. If an ERC-20 project running on Ethereum needed to sell its token for ether to facilitate its own transaction, then the selling will likely occur before the transaction needs it.
Ethereum co-founder Vitalik Buterin has responded to these criticisms, explaining that the protocol will not do “full economic abstraction” in the future. He also said Ethereum’s development team is already considering competing proposals that would require ether to be paid at the protocol level.
In March this year, Jay Clayton, Chairman of SEC has confirmed that Ethereum (ETH) doesn’t qualify as a security under the agency’s laws. The latest confirmation has cleared the air over the long going suspicion of treating ETH as a security.
Just for reminder, last year, CFTC already said they were looking for an in-depth analysis of Etherum blockchain. Official announcement then stated that the commission would need a better understanding of ETH and how it goes beyond Bitcoin future.