Global DCA Response – CFTC Seeks Public Comment on FTX request for Amended DCO Registration Order – Global DCA

Global DCA Response – CFTC Seeks Public Comment on FTX request for Amended DCO Registration Order

Global DCA Response – CFTC Seeks Public Comment on FTX request for Amended DCO Registration Order

GDCA writes to highlight the significant public policy benefits that could result from the approval of FTX’s proposal to amend its DCO registration order to permit it to offer non-intermediated clearing of crypto derivatives directly for participants. We believe that approving FTX’s request would signal U.S. global leadership in regulating the digital assets industry, would bring conduct that is currently happening offshore and in unregulated exchanges onshore and into the regulatory ambit, and would lead to broader market access and inclusion, among other benefits.

Specifically, GDCA offers the following comments: 

  • We applaud the process. GDCA believes that the best policy decisions are made when a clear and transparent decision-making process is outlined, when the public and industry partners are consulted and have a clear mechanism to provide feedback, and when the public has sufficient time to consider and discuss the issues at hand. 

  • Supporting Innovation. So long as core principles and other requirements of the Commodity Exchange Act (“CEA”) and the regulations thereunder are met, the CFTC should work to accommodate new technologies and innovative market structures. GDCA supports innovations that can broaden Americans’ adoption of crypto assets and improve liquidity and prices. FTX’s narrow proposal (limited to derivatives on crypto assets) would offer a new way for U.S. customers to access derivatives directly with a DCO. 

  • Bringing conduct onshore and under regulation. Huge volumes of crypto derivatives are traded every day in offshore, essentially unregulated markets, including on peer-to-peer DeFi platforms. While we do not have hard data, we believe that many Americans are trading in these markets today. This includes professional trading firms with offshore affiliates, retail participants with the technical know-how to VPN around geo-fence restrictions, and others who find ways to access such products. 

  • Defending U.S. global leadership. Similar to the point above, GDCA believes that approving FTX’s proposal would help the U.S. maintain a position of global leadership on the regulation of crypto assets. 

  • Supporting inclusion and access. The GDCA believes that over the long run, cryptocurrencies and blockchain technologies will help to usher in more financial inclusion and equity, will lower costs, and help bring financial services to the unbanked and underbanked. 

Against these benefits, the CFTC will have to weigh the risks that a new non-intermediated model would pose to customers and the financial system. These risks must be taken seriously. Protecting market participants from the risk of default is one of the CFTC’s primary duties, and fulfilling it in this circumstance is even more important given that many end-users of FTX’s crypto derivative products would be retail. GDCA of course wholeheartedly supports the CFTC’s mission in this regard and recognizes that the risks of a dis-intermediated structure must be carefully examined. 

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