Bitcoin: Will FTX’s SBF receive approval for a derivatives license?

Lavina Daryanani
Source: CNBC

Crypto exchange FTX is awaiting a green light from regulators to allow individual investors use derivatives. The same would allow them to place leveraged bets on cryptos like Bitcoin. However, The exchange’s rivals, along with stalwarts from the traditional financial landscape, have however been opposing its case.

Per them, the exchange’s proposal would put a threat to market stability. FTX has proposed that investors would be able to deal directly with the exchange to trade instead of going via brokers. The said approach, however, represents a “change” from the way derivatives markets have operated for decades, and hence the opposition.

Read More: FTX’s Sam Bankman-Fried Says He Has Over $2 Billion to Aid in Crypto Deals

FTX’s lobbying is on

FTX’s executive Sam Bankman-Fried continues to make his side of the case strong. Time and again he has argued that the proposal would bring the latest tech to the US markets. In fact, he has also asserted that the exchange has safeguards to limit risk.

In a Wall Street Journal interview, Bankman-Fried said,

“We’re going to have a more complete set of customer protections, disclosures, and suitability checks in place than currently exists in the futures industry.”

He added,

“If anything, we’ll be going a little bit overboard on that.”

Does Bitcoin pose a realistic threat to FTX’s proposal?

On the macro frame, Bitcoin’s estimated leverage ratio has been on the incline. This basically suggests that derivatives traders have been taking more risks to encash the state of the market. However, there have been several instances in the recent past where they’ve gotten to taste the market’s bitter medicine whenever the volatility has increased.

Read More: Even as $5M worth Bitcoin & alts get rekt, investors remain ‘bullish’; Here’s why

Source: CryptoQuant

Now, per the opposers, FTX getting a green flag would be quite detrimental because of the same. They’ve been emphasizing that unsophisticated and naive market participants would have to be shielded from the volatility of the derivatives market. FTX, on its part, has asserted that it is committed to investor protection. 

Well, Bankman-Fried is a relative newcomer to Washington lobbying. And the said proposal is more like a litmus test for him and his exchange.

Read More – Is a Goldman Sachs-FTX partnership on?