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Alternative Market Briefing

Cryptocurrency derivatives may calm volatile coin prices

Friday, May 25, 2018

Bailey McCann, Opalesque New York:

This week, the CFTC released new guidance for companies planning to offer cryptocurrency derivatives. In the advisory, the regulator focused on how it would handle the new financial instruments and also highlighted that it would be watching the crypto market closely.

"CFTC staff is providing this information, in part, to aid market participants in their efforts to design risk management programs that address the new risks imposed by virtual currency products," DCR Director Brian Bussey said in a statement on the advisory. "In addition, the guidance is designed to help ensure that market participants follow appropriate governance processes with respect to the launch of these products."

The guidance comes as the CME Group and others have recently announced plans to launch their own crypto derivative products. Regulators are already skeptical of the rapid growth of cryptocurrencies and adding derivatives into the mix is unlikely to calm them. But, maybe it should. Delegates at the recent Opalesque Cryptocurrency & Blockchain Roundtable argue that crypto derivatives could help reduce some of the volatility in cryptocurrency prices.

Roy Niederhoffer, President of R.G. Niederhoffer, said at the roundtable that he thinks crypto derivatives will not only calm volatility in currency pricing but help to institutionalize the crypto space. "D......................

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