The US CTFC is opening a formal consultation on the use of Ethereum and Ether, as it prepares for potential futures based on ETH.
With the Securities Exchange Commission beginning to flex the muscles in the ICO space, as it begins to crack down on the issue of cryptocurrencies acting as Securities, its regulator – and sometimes rival -, the Commodity Futures Trading Commission (CFTC) is now turning the spotlight returns to the cryptic markets.
First on the list for his examination in this new phase, it would seem, it is Ether. The main currency of the Ethereum blockchain is currently the third-rank cryptocurrency by market capitalization, according to CoinMarketCap.
As reported by Reuters, following an ongoing discussion in 2018 between the two regulators – and the SEC's comments suggest that he did not think that Ether had fallen under his competence as security because of its level of decentralization (a position, it should be noted , which does not exempt all Ethereum blockchain-based ERC-20 tokens used by many ICOs) – the CFTC is now initiating a formal consultation with asset users in order to evaluate exactly how it should handle it as a commodity, as well as subsequent investment products that can be based on it.
In its process summary, part of its so-called LabCFTC initiative, the regulator says that its "Request for input" is to "better inform the Commission's understanding of technology, mechanics and markets for virtual currencies over Bitcoin, to say here Ether and its use on the Ethereum network. "
He goes on to say that the body is "seeking public feedback to promote oversight of these markets and the development of regulatory policy" so as to ensure "the integrity of the derivatives markets as well as the monitoring and reduction of systemic risk by increasing legal certainty "in the markets. "
"The RFI seeks to understand the similarities and distinctions between some virtual currencies, including Ether and Bitcoin," he adds, "as well as opportunities, challenges and specific risks of Ether."
It starts from a position of considering Ether as the "fuel" of the Ethereum network and its main functionalities: the ability to create intelligent contracts and token specific to the activities. The consultation, he says, is to better understand "these technologies have given the dimension of Ether in the market and the potentially unique attributes related to Bitcoin".
We are told, "public feedback on a series of questions related to technology, opportunities, risks, mechanics, use cases and underlying markets, related to Ether and the Ethereum network".
The move may be seen, perhaps, as a precursor to the supply of regulated futures based on Ethereum – similar to the Bitcoin futures contracts hosted by CBoE and CME already offered and controlled by the name in the RFI document, which allow to investors to speculate on the movements of cryptocurrency prices over time and take a "long" or "short" position according to their opinions on how the market will behave. In order for such products to be purchased on the market, however, the CFTC has requested that certain crypto-specific "improvements" be respected above and beyond standard regulations in order to bet on the single issue of dealing with bitcoins; this document, therefore, will serve to establish any improvements required to offer similar derivatives related to Ether.
According to the recent Exchange review of the crypto-pricing site, CryptoCompare, the two US-based bitcoin products are diminished in volume by the "non-regulated and often high-indebted" swaps "offered by the BitMex exchange based in the Seychelles .
BitMEX, according to the report, currently owns about 95% of the total market for these derivatives in the bitcoin market, while it – and other exchanges worldwide – also offers futures related to other cryptocurrencies, such as Ether. The combined market for these derivatives, at just over $ 2 billion during the November report, accounted for around 25% of the total encryption volumes recorded.
However, despite the CME and CBoE products being relatively niche – even if they are part of the relatively niche-encrusted market as a whole – they have been and are highly influential in the United States in shaping the perception of Bitcoin as assets capable of being packaged in a satisfactory way for the regulator. Similar, regulated products backed by Ether could have the same beneficial influence of PR even in the eyes of institutional investors and the so-called "Main St." for that good.
The committee welcomes requests from all interested parties, both as regards the general public, which provides for a period of sixty days for the RFI, with details to be found here.