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CFTC Allows Bitcoin Futures to Trade, Price Jumps

by Thomas Ressler

Bitcoin valuations leapt higher to start the month of December when the US Commodity Futures Trading Commission, which regulates the American futures market, gave its blessing to the cryptocurrency. The CFTC announced that the Chicago Mercantile Exchange Inc. (CME) and the CBOE Futures Exchange (CFE) self-certified new contracts for Bitcoin futures products, and the Cantor Exchange (Cantor) self-certified a new contract for Bitcoin binary options.

“Bitcoin, a virtual currency, is a commodity unlike any the commission has dealt with in the past,” said CFTC Chairman Christopher Giancarlo. “As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE, and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets.” In working with the regulator, CME, CFE, and Cantor have set “an appropriate standard for oversight over these Bitcoin contracts, given the CFTC’s limited statutory ability to oversee the cash market for Bitcoin,” he added.

Giancarlo went on to warn market participants that the still-developing underlying cash markets and exchanges for Bitcoin remain largely unregulated markets over which the agency has limited statutory authority. “There are concerns about the price volatility and trading practices of participants in these markets,” he said.

Further, the CFTC expects that these futures exchanges, through information sharing agreements, will monitor the trading activity on the relevant cash platforms for possible effects on the futures contracts’ price discovery process. Those would include potential market manipulation and market dislocations stemming from flash rallies and crashes and trading outages. “Nevertheless, investors should be aware of the potentially high level of volatility and risk in trading these contracts,” the regulator continued.

As of this writing, Bitcoin’s price was again surging toward $11,000, shooting up more than $300 since the news of the CFTC’s approval was announced. Its market capitalization stood at $0.18 trillion.

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