The Commodity Futures Trading Commission (CFTC) announced today 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. In making the announcement, the CFTC reiterated its view that bitcoin is a commodity for purposes of the U.S. Commodity Exchange Act, while at the same time conceding that it is not the sort of traditional commodity for which the regulations were designed. The CFTC's release quotes CFTC Chairman J. Christopher Giancarlo as saying, in what many might view as an understatement, that "Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past."

According to the CFTC's release, the CFTC engaged in rigorous multi-week discussions with CME and Cantor regarding their proposals, as a result of which CME, CFE and Cantor agreed to significant enhancements to the design of the contracts to be traded, their settlement, margining and information sharing with the underlying bitcoin exchanges. Margin requirements for the contract on the CME are anticipated to be 35%. The CFTC also signaled that it will continue to collect surveillance information on the trading of these new derivatives.

With the self-certification completed, the CME is on track to launch the bitcoin futures contract on December 18, 2017, as it has planned. CBOE is expected to announce the date for the launch of its bitcoin contract soon.

The CFTC emphasized that a contract's being permitted to be offered through CFTC-regulated exchanges and cleared through CFTC-regulated clearinghouses does not represent approval of the contract or the underlying commodity by the CFTC, and in particular shouldn't be viewed as an endorsement by the CFTC of the use or value of bitcoin or any other virtual currency product or derivative of such products. The CFTC, like the SEC, continues to focus the investing community on the extreme volatility and unique risks presented by bitcoin and similar virtual currencies. The CFTC also concedes that the reach of regulators to protect investors in bitcoin and other virtual currencies is constrained. Chairman Giancarlo warned that "Market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority."

The launch of derivative contracts in bitcoin is expected to herald both the ability to short, that is, to bet on falls in bitcoin's price, as well as an increase in institutional investor interest, from hedge funds and banks, among others, in trading bitcoin.

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