Recently, the chairman of the US Commodity Futures Trading Commission (CFTC) shared his controversial stance towards Ether, the Ethereum network’s native cryptocurrency. In his speech at the Yahoo Finance’s All Markets Summit held in New York, Heath Tarbert identified Ether (ETH) as a commodity.
The crypto community heavily celebrated the chairman’s remark. If ETH would be classified as a commodity, it would fall inside the perimeter of the CFTC. However, if it would be considered as an investment, then the US Securities and Exchange Commission would have regulatory power over it.
Aside from saying that ETH is a commodity, Tarbert went as far by saying that the market can expect ETH futures contracts and derivatives available for trading soon.
According to CEO Perianne Boring of the Chamber of Digital Commerce, the CFTC’s view about the potential trading of ETH derivatives is an indication of market maturity. He noted that it is a hopeful sign that the country is considering to embrace digital assets technology.
Being defined as a commodity can make all the difference for Ether and its futures product. It’s worth noting that Bitcoin (BTC), the crypto asset that has been identified by the US regulators as a commodity, has been trading futures contracts since Dec. 2017.
However, it might be too early for the community to expect the inception of ETH futures contracts in the market. A spokesperson for the Chicago Mercantile Exchange, one of the largest financial exchanges in the world that launched Bitcoin futures in 2017, confirmed that the company’s focus is on BTC futures contracts. Notably, the CME wants to provide users with more options on their Bitcoin futures products in the first quarter of 2020.
Crypto market stabilization
A futures contract, by definition, is an agreement traded on regulated exchanges to buy or purchase an asset at a fixed price, to be delivered and paid for once the contract expires. It allows investors to strategize and to combat the volatility associated with the underlying asset. In the case of Bitcoin futures contracts, the underlying asset is BTC, which is extremely volatile.
Regulated futures contracts help a lot in terms of stabilizing the crypto community since they allow investors to speculate on the market direction. Ultimately, they can be more agile in making preparations for any market condition.