CME Executive Why Are People Interested in Our Cryptocurrency Products

Why are people interested in our cryptocurrency products?

Author: KATHERINE ROSS, Blockworks; Translation: Song Xue, LianGuai

The head of crypto products at CME Group said that institutional crypto investors have “mostly” moved on from the crash of 2022 and are now focusing on understanding how cryptocurrencies and their underlying technology drive innovation.

Giovanni Viciioso stated that interest in digital assets has been rising even before BlackRock received regulatory approval for a physically-backed bitcoin ETF.

In late June, CME Group announced that it plans to launch Ethereum and Bitcoin Ratio Futures on July 31, pending regulatory approval.

Viciioso pointed out that the importance of ratio futures products is that “market participants have the ability to trade the relationship between bitcoin and ethereum in one transaction.”

CME Group added bitcoin futures to its futures contracts earlier this year and added ethereum options contracts in 2022. The company first launched bitcoin futures in 2017.

“More and more customers and institutions are starting to think more about the technology that supports bitcoin and ethereum, and they will certainly see more conversations about how the underlying technology truly drives innovation, such as tokenization. I think this is also the real reason that sparks people’s interest in our products,” Viciioso said.

He stated that CME Group is currently not planning to launch products other than ethereum or bitcoin because “it may be a little too early for their institutional clients.”

If CME Group wants to expand its current product lineup, another obstacle they face is the regulatory environment. Viciioso stated that they are seeking clarity from regulatory authorities on what constitutes securities and commodities — “until then, we will continue to focus on…bitcoin and ethereum contracts.”

The U.S. Securities and Exchange Commission has not provided a clear regulatory framework for including digital assets within its jurisdiction. Instead, the agency has been taking a “regulate by enforcement” approach as it targets cryptocurrency exchanges like Binance and Coinbase for allegedly offering assets or services it considers securities.

Uncertain regulatory outlook

If more rulings like Judge Analisa Torres’ decision in the SEC’s case against Ripple are made, the regulatory environment may still remain uncertain. The judge stated that XRP is not a security, but the XRP sold by its institution meets the criteria for securities.

However, CME Group continues to see new clients coming in.

Viciioso stated that they have seen the emergence of miners similar to farmers because they “have a natural need to hedge bitcoin risks.”

Outside of CME Group, miners have also achieved some small successes.

CME Group has been exploring other types of bitcoin-related products.

“We have also piqued the interest of participants, especially institutions, with products like bitcoin non-deliverable forwards,” he said. “So, people are interested in this, and it’s something we’re currently exploring, but it would allow us to offer off-exchange exposure to bitcoin.”

Zero-coupon delivery forward contract is a short-term forward contract settled in cash.

As for the future, Viciioso said that he believes the CME has not “finished” yet.

“When you look at Bitcoin and Ethereum, you know, in terms of introducing new products and product innovation, we can certainly do different things. I mentioned the NDF we are developing, but it also introduces different mechanisms, right, which also helps improve market efficiency.”

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