The Chairman of the U.S. Commodity Futures Trading Commission (CFTC) has recently revealed the regulator expects to see more firms apply to become federally-related clearinghouses as a consequence of an “explosion of interest” in cryptocurrencies.
Speaking before the U.S. House Agriculture Committee earlier this year, CFTC Chairman J. Christopher Giancarlo revealed, while testifying on the “state of the CFTC” that the clearinghouses the agency regulates are a “critical” point of risk in the “global financial system.”
Per Giancarlo the clearinghouses, which are financial institutions that act as intermediaries to facilitate transactions between two entities, keep growing and becoming more complex. The CFTC examines these to identify any potential issues, a task that is becoming increasingly important “to overall financial stability.”
Currently, the agency regulates a number of registered clearinghouses in the U.S., and six located overseas. The amount of firms it has to regulate is set to grow, Giancarlo noted, thanks to the introduction of cryptocurrency futures.
LedgerX, a cryptocurrency derivatives provider, is notably already a clearinghouse, but platforms like ErisX are waiting for the CFTC to approve their applications to be approved. Giancarlo stated:
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.
The Chairman of the CFTC then addressed the regulator’s fintech research group LabCFTC, which helps it keep track of changing technology. Giancarlo noted that blockchain technology and crypto were important aspects of the “rapidly changing markets,” and added the research group helped the CFTC understand them.
Per his words, LabCFTc helped the regulator “determine the value of technological innovations,” including that of cryptocurrency futures products like those offered by regulated exchanges like the CME and Cboe.
There are various platforms looking to offer physically-settled bitcoin futures contracts, including ErisX, LedgerX, and the Intercontinental Exchange’s venture Bakkt. As covered, Giancarlo has in the past revealed he believes institutional investment will bring maturity to the crypto market.