FTX’s head of U.S. regulatory strategy says the Commodities Futures and Trading Commission has shown openness to its proposal to offer direct access to trade Bitcoin (BTC-USD) and Ethereum (ETH-USD) on margin without intermediaries.
"At first, there might have been some amount of skepticism, [but] by the end of the discussion, there seemed to be a considerable amount of openness to what we're trying to do," Mark Wetjen, head of policy and regulatory strategy at FTX U.S and former CFTC commissioner, told Yahoo Finance on Friday. Wetjen was referencing a public roundtable the CFTC held in May on FTX’s proposal.
"I think there's generally high level of interest and intrigue in our proposal by the CFTC," Wetjen said. "We believe that they have a view that the proposal actually addresses a lot of interesting different issues that the CFTC has dealt with for some amount of time."
The cryptocurrency exchange has proposed an automated collateral system that would require customers to deposit collateral and have enough funds to cover margin requirements, calculated automatically. If the margin fell too low, an automatic selling process for the investment would start.
While the new system tries to solve for the mismatch of speed for crypto derivatives verses the current clearing house model, some worry it could intensify selling pressures during times of market stress.
Wetjen says the auto de-risking feature is already used on FTX.com, and the proposal before the CFTC would require even more initial margin from participants before they can trade. Wetjen says less than 1% of overall transaction data on FTX’s trading platform comes from the automatic investment drawdown to meet margin calls.
“It's a risk reducing feature and this is one of the reasons why we think the agency should be excited about this, because our model requires all the customer collateral to be on the platform at all times,” he said.
Meanwhile, Wetjen says he expects more federal oversight of crypto markets will create more clarity and bring in more investors into crypto, quelling volatility.
“As soon as that happens, there's going to be much more clarity for the investor, there's going to be more clarity for the institutional investor, the institutional investor is going to become more and more comfortable stepping into the space. all of that is going to lead to a significant maturing process for the industry,” Wetjen said.
Jennifer Schonberger covers cryptocurrencies and policy for Yahoo Finance. Follow her at @Jenniferisms.