By
Chimamanda U. Martha
April 19th, 2024
The launch of Bitcoin Futures brought not only the escalation of its price but the hot discussions on the legal and regulatory requirements for that kind of contracts.
Bitcoin has become a significant part of the financial markets. It is a hot topic at all levels: politicians and financiers, professional investors and blue-collars – the whole world is watching the rise of the cryptocurrency. No wonder that traditional financial instruments get applied to the innovative currency.
The Chicago Board Options Exchange (CBOE) became the pioneer in the sphere of bitcoin futures. It was a great success: the first two hours brought CBOE more than 800 contracts. The moment of the launch of bitcoin futures contracts was tough for the cryptocurrency: its price had fallen by over $5000 during the two preceding days. But CBOE and its bitcoin futures debut led to an exponential growth and next 24 hours brought bitcoin 22% growth which turned into long-lasting positive trend.
This news caused lots of discussions in the cryptosphere. Opinions got divided but that is not something extraordinary. However, some market players managed to make high-profile statements. One of them is the Hong Kong Securities and Futures Commission (SFC). The launch of bitcoin futures by CBOE and the upcoming similar act by CME Group became a reason for the SFC to state its position on the whole situation.
They are not going to forbid the operations of the kind, but remind the investors of the legacy aspects of trading. The SFC admits the fact that the discussed futures are launched by the well-established futures and commodities exchanges that got the official authorization from the Hong Kong Commission. In this case “Hong Kong investors may be able to trade in Bitcoin Futures through an intermediary which is a member of these exchanges”.
The things are not as simple as they seem to be. Dealing in bitcoin futures and even providing advisory services in relation to bitcoin constitute different types of regulated activities. The SFC gave clarification on the problem: “The industry is reminded that a party is required to have an appropriate license with the SFC if it provides any other business services relating to Bitcoin Futures which constitute a “regulated activity”. This is irrespective of whether the party is located in Hong Kong, so long as its business activities target the Hong Kong public.”
Today bitcoin is causing lots of optimism. A new all-time high of more than $18,000 was reached, the amount of opportunities for investors increases every day. And that had raised the thorny issue of the legitimacy of the bitcoin operations.
SFC Executive Director of Intermediaries Julia Leung warned against breaking the legal and regulatory requirements: “Parties routing orders from investors in Hong Kong to trade bitcoin futures contracts without a relevant license from the SFC may be committing a criminal offence.
Investors are warned that the risks of high price volatility and illiquidity may be magnified in trading cryptocurrency futures contracts and other related investment products by the speculative nature of the underlying assets, that is, the cryptocurrencies, and the leverage embedded in these products”.
The bitcoin futures contracts are recognized by the Hong Kong finance regulator, even though it requires obtaining a license to offer such services. The statement of the SFC lacks the trust in cryptocurrencies, but what is more important – it admits that usage of traditional financial contracts for bitcoin can be legal.
