Wednesday, the U.S. Commodity Futures Trading Commission (CFTC) approved a proposal by a Chicago-based brokerage and exchange for cryptocurrency derivatives to operate as its own registered clearinghouse.
CFTC gives green light for Bitcoin futures Trading
Bitnomial, a US-regulated digital asset derivatives exchange, was given a US clearinghouse license today to clear margined digital asset futures and options contracts, making it the first and only crypto-native exchange to hold all three US derivatives exchange, clearinghouse, and broker licenses.
Furthermore, Bitnomial is the only US exchange that offers margined, physically delivered digital asset derivatives, which means users can receive genuine ownership of digital assets rather than merely a cash payout upon settlement.
This clearinghouse license (DCO) completes Bitnomial’s license set, which already includes an exchange license (DCM) and a brokerage license (FCM), allowing Bitnomial to cater to the unique needs of digital asset traders, brokers, and dealers across the entire derivatives industry, all under the federal oversight of the United States Commodity Futures Trading Commission (CFTC).
Our aim is to introduce a global derivative trading platform, regulated in the US, that marks a pivotal shift from traditional USD and Treasury margin collateral to incorporating digital assets as collateral as well. This change is intended not just for crypto trading but also for a broad spectrum of physical and digital commodities.
While Bitnomial Exchange has been live with margin digital asset trading since late 2020, we’ve been quiet about our broader strategy while working behind the scenes to prepare for our larger business deployment.
Unlike other businesses that have attempted to disintermediate the brokerage industry, our FCM offers wholesale digital asset-related services and support to our brokerage partners, institutions, and dealers. Now that the licensing process is complete, we can shift our focus to expanding Bitnomial’s product offering and customer base.Luke Hoersten, Founder and CEO of Bitnomial
By approving the plan, Bitnomial, a 2014-founded exchange, signifies that CFTC has authorized a vertically integrated market structure for the first time. The firm’s application was approved by two Democratic commissioners, two Republican commissioners, and one Democratic commissioner with one dissenting vote.
The crypto community adds wins
The CFTC approval is also a victory for an industry plagued by controversy. Binance, the world’s largest crypto exchange, agreed in November to pay more than $4.3 billion to settle US claims that it violated anti-money laundering rules. Changpeng Zhao, the company’s former CEO, faces up to 18 months in prison. A jury had already found FTX founder Sam Bankman-Fried guilty of fraud.
Vertical integration in the crypto business has been criticized by the White House and a number of other regulators for potentially generating conflicts of interest.
At the same time, government agencies face industries that are ready to turn to the courts when things go wrong. The CFTC was sued last month by an events betting platform for rejecting its request to allow investors to bet on US elections.
“We have to apply the rules fairly and equally to all registrants,” said CFTC Chair Rostin Behnam, who voted in favor of Bitnomial’s application. “Otherwise, in my opinion, that is a terrible dereliction of duty and a very worrisome direction for government.”
The recent rise in the price of Bitcoin and the anticipated of a spot Bitcoin ETF demonstrates a growing institutional interest in the United States as a hub for physical digital asset exposure, which is underpinned by a solid US regulatory framework.
As the spot ETF gives direct Bitcoin price exposure, this trend will increase demand for physical Bitcoin derivatives trading, fostering the expansion of derivatives as instruments for Bitcoin inventory management and different trading methods inside a regulated environment. The CEO of Bitnomial ends with a promise of transparency stating:
We would like to thank CFTC Chairman Behnam, the Commissioners, and especially CFTC DCR staff for their coordination and hard work throughout the licensing process. The CFTC is vital to the growth of the digital asset industry globally and we look forward to continuing our collaboration as we build a safe, transparent, and innovative digital asset derivatives market in the US.Luke Hoersten, Founder and CEO of Bitnomial