Futures Industry Group Slams Bitcoin Derivatives


Bitcoin futures are now officially “a thing,” and one of the futures industry’s leading trade groups was not pleased about how it happened. Futures Industry Association CEO and President Walt Lukken recently wrote an open letter to Commodity Futures Trading Commission Chairman Christopher Giancarlo outlining the concerns his members have with the process in which cryptocurrency futures have come to market.

“In light of the CFTC and the [National Futures Association]’s public statements regarding the riskiness of the underlying cryptocurrency products, we believe that the launch of new exchange-traded derivatives in cryptocurrencies deserves a healthy dialogue between regulators, exchanges, clearinghouses and the clearing firms who will be absorbing the risk of these volatile, emerging instruments during a default,” Lukken said.

Unfortunately, the launching of these innovative products through the one-day self-certification process did not allow for proper public transparency and input, he added. “While suited for standardized products, this process does not distinguish for a product’s risk profile or unique nature,” said the official.

Given the newness of these products, the FIA’s members also worry they will bear the brunt of the risk associated with them through their guarantee fund contributions and assessment obligations. More public discussion should have been conducted ahead of time, Lukken added.

Early in December, the NFA issued an advisory, reminding investors that, “just like any other speculative investment, trading futures on virtual currencies, including Bitcoin, have certain benefits and various risks. While futures on virtual currencies must be traded on regulated futures exchanges, trading these products involves a high level of risk and may not be suitable for all investors.

“It is critical, therefore, for investors who are considering trading virtual currency futures to educate themselves about these products, understand their risks, and conduct due diligence before making investment decisions. Investor protection begins with investor education,” it added.

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