Bitcoin Tests Retracement

The CFTC is moving to grant another license to a cryptocurrency derivative exchange. On Business Insider, we read:

While most federal regulators in the US have taken a sluggish approach to cryptocurrencies, the Commodity Futures Trading Commission (CFTC) has been an exception. In September 2015, the body designated cryptocurrencies as commodities, rather than currencies.

Then, in May 2016, it gave TeraExchange, a cryptocurrency clearing platform, full authorization to trade digital currency derivatives, making it the first company in the US to receive such permission. Now, the CFTC has granted the same permission to another player, LedgerX, a cryptocurrency trading and clearing platform for institutional investors. The CFTC’s decision to approve a second such company suggests it may license more players going forward.

It’s worth noting the CFTC may find it easier than other federal agencies to deal with cryptocurrencies. The CFTC’s mandate covers all forms of trades and bets made on the future performance of a commodity, regardless of what it may be, so by classifying cryptocurrencies under this umbrella term, it can apply its existing regulatory framework to the asset class. The CFTC is therefore in a position to license firms like LedgerX because they handle only trades, swaps, and derivatives based on cryptocurrency movements, rather than the assets directly. In contrast, regulators that actually handle the purchase and sale of assets, such as the Securities and Exchange Commission (SEC), may find it harder to fit cryptocurrencies into their current taxonomy.

This is a sign that there’s a lot of interest in Bitcoin. It might make it easier for investors and traders to short Bitcoin, which hasn’t been very easy so far. At the same time, we don’t expect this trend to change. It is quite possible that other Bitcoin derivatives exchanges are going to apply to the CFTC for such permission. So, in our opinion, we are likely to see more derivatives exchanges in the years to come. On a tangent, the fact that new Bitcoin-related exchanges are approved might be a sign of a peak in the interest.