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Cboe Digital Gets Thumbs Up From CFTC to Launch Margin Crypto Futures

The crypto arm of major options exchange Cboe has received approval to launch leveraged Bitcoin and Ether futures contracts from the U.S. commodities regulator.

According to a Jun 6 press release, Cboe Digital, the crypto subsidiary of the Chicago Board Options Exchange, has been given approval to launch margined futures contracts by the Commodity Futures Trading Commission (CFTC).

Starting with physically and financially settled Bitcoin and Ether contracts in the second half of 2023, Cboe Digital will be the first U.S.-regulated crypto native exchange to offer leveraged derivatives products.

Cboe first started offering crypto futures contracts in December 2017, with some suggesting that the sudden ability to profit from a downswing in BTC price contributed to the bull market which followed in early 2018. However, until now all contracts had to be fully collateralized, requiring customers to outlay the full amount upfront.

The new margined futures contracts will need only a percentage of the value to be posted as collateral. This allows customers to trade bigger contracts using less capital, but also increases the risk of automatic liquidation with only a small price movement in the wrong direction.

CFTC Commissioner Christy Goldsmith Romero commended Cboe Digital’s approach, to operate within the framework of existing futures markets and regulations, explaining:

“Too often in recent years, crypto firms have sought to take a business model or market structure that exists in an unregulated environment and port it over to the regulated environment. The CFTC does not have a window into the risks associated with models or structures in an unregulated environment.”

During the application procedure, Goldsmith Romero had requested additional measures for critical-risk mitigation, and praised Cboe’s willingness to engage with the CTFC and implement such changes.

While Cboe Digital’s approval does prove that the CFTC is not entirely crypto-phobic, it also shows the value of playing by the existing rules. As we previously Observed, in March the commission raised a complaint against Binance (who else), over multiple alleged compliance violations.

Still, the agency clearly doesn’t appear to hold the same grudge against all things crypto as the Securities and Exchange Commission (SEC). Lest we forget, that ‘esteemed’ organization is currently involved in ongoing legal action against Binance, Coinbase, Ripple, Genesis, Gemini, Bankman-Fried, Kim Kardashian and Justin Sun… to name but a few.

It will be interesting to Observe whether any other players follow Cboe Digital into the margin crypto futures market, now that the path to approval has been cleared.