Regulators in Europe and the US are taking opposite approaches to crypto derivatives, with significant implications for the market.
The European Securities and Markets Authority (ESMA) has issued a warning that perpetual contracts may fall under national CFD product intervention measures. This means that EU-based retail traders will face stricter regulations, including leverage caps and margin close-out rules. ESMA's approach is centered around assessing the 'substance-over-form' of these products, rather than their commercial names.
In contrast, the Commodity Futures Trading Commission (CFTC) in the US is working to 'onshore' perpetual products with safeguards. This involves embedding perpetual contracts into existing futures market plumbing, which would allow for up to 10x leverage. CFTC Chairman Michael Selig has emphasized that this approach will provide better oversight and protection for investors.
The regulatory tug-of-war between Europe and the US is expected to have significant implications for the $51 trillion to $77 trillion crypto derivatives market. As the situation unfolds, it's essential to monitor enforcement signals, product launches, and market developments to understand the impact on traders and investors.