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Cboe Clear Digital receives CFTC approval to offer margined crypto futures contracts

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(Kitco News) - Cboe Global Markets, a leading provider of market infrastructure and tradable products, has announced that the Commodity Futures Trading Commission (CFTC) has approved Cboe Clear Digital to expand its product offering to include margined futures contracts.

Cboe Clear Digital is the first U.S.-regulated crypto native exchange and clearinghouse combination platform to offer leveraged derivatives products, the announcement said. “Cboe Digital's vision to bring trust and transparency to crypto spot and derivatives markets is an intermediary-inclusive model.”

The CFTC confirmed the new development in a press release on Monday, saying, “The amended order permits Cboe Clear to provide clearing services for digital asset futures on a margined basis for futures commission merchants, in addition to the fully collateralized futures and fully collateralized swaps previously authorized.”

The first products to launch following this new approval will be “physically and financially settled Bitcoin and Ether contracts,” which Cboe plans to launch in the second half of 2023.

Up to this point, Cboe Digital has offered trading and clearing of Bitcoin and Ether futures on a fully collateralized basis, which requires customers to outlay the full amount of a futures contract upfront.

The new margin model will only require a percentage of the total posted as collateral. This offers customers a less capital-intensive way to trade cryptocurrency futures, Cboe said. All trades will be executed and cleared through an approved set of member Futures Commission Merchants (FCMs) with Cboe Digital's clearinghouse acting as the central counterparty.

“We are grateful to the CFTC for working with us as we continue to build out our vision for a transparent, U.S. regulated crypto marketplace that welcomes intermediaries,” said John Palmer, President of Cboe Digital. “Derivatives are a time-tested and valuable tool that enable investors to gain market exposure and manage their risk.”

Cboe Digital is unique in that it allows investors to trade spot and margin futures on the same platform, “which fills a key gap in the US landscape, and brings greater cost and operational efficiencies to enhance customers' trading experience,” Cboe said.

Along with offering access to margin futures, Cboe Digital's spot market supports trading in Bitcoin (BTC), Bitcoin Cash (BCH), Ether (ETH), Litecoin (LTC) and USD Coin (USDC).

Cboe Global Markets doubles down on digital assets with Cboe Digital

“As the regulated digital asset derivatives market evolves, the Commission has a critical role to play in ensuring that any risks associated with that evolution are appropriately addressed by customer protections, guardrails and safeguards,” said CFTC Commissioner Christy Goldsmith Romero in a separate statement. “The Commission should assess the risk that flows from any application, determine if that risk can be adequately mitigated, and require risk-mitigation measures.”

“Too often in recent years, crypto firms have sought to take a business model or market structure that exists in an unregulated environment and port it over to the regulated environment,” Goldsmith Romero said. “Cboe has not done that, instead operating within the parameters of the traditional futures market structure and regulatory framework.”

Goldsmith Romero added that Cboe has “constructively engaged with the staff and my office to address concerns related to risk, and implement risk-mitigating measures,” and for these reasons, their application for an amended order of registration has been approved.

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