Crypto.com's latest license approval from the CFTC delivers on President Trump's promise to reshape U.S. crypto regulation. | Credit: Getty Images.
Key Takeaways
Crypto.com has secured a full house of CFTC licenses.
The exchange can now offer margined derivatives products without relying on the CME.
Opening up the U.S. market to leverage trading is a victory for Trump’s pro-crypto agenda.
Crypto.com has become the first American crypto exchange to secure a full house of licenses from the U.S. Commodity Futures Trading Commission (CFTC).
With the latest amendment to its designated contract market (DCM) license, announced on Tuesday, Sept. 30, the company can now offer the full range of derivatives services to users.
Understanding CFTC Licenses: FCM, DCM, and DCO
The CFTC regulates derivatives markets through a series of licenses, each with distinct roles and regulatory obligations.
The three core categories are: Futures Commission Merchants (FCMs), Designated Contract Markets (DCMs), and Derivatives Clearing Organizations (DCOs).
FCMs act as brokers between customers and futures markets. They can solicit or accept orders for futures, options on futures, and swaps, while holding customer margin funds in segregated accounts.
Meanwhile, DCMs are CFTC-licensed exchanges where futures and options are listed for trading. However, they can’t operate without a clearinghouse. Every contract they list must be cleared through a registered DCO.
Finally, DCOs function as clearinghouses. They are responsible for guaranteeing trades, managing margin, and mitigating counterparty risk.
The three-pronged licensing framework is designed to limit conflicts of interest and ensure fair play. FCMs connect customers, DCMs list contracts, and DCOs clear them. No single entity can perform all functions without separate approvals.
Crypto.com’s Journey to Full-Stack Derivatives Exchange
Like other exchanges, Crypto.com’s journey to CFTC regulation has unfolded over the course of several years
In March 2022, the company obtained initial DCM/DCO registrations through its acquisition of Nadex. However, these only permitted it to offer 100% collateralized positions—no leverage or credit exposure allowed.
With the latest amendment, however, crypto.com can legally offer margined futures to American users, making it the first retail-focused exchange able to do so.
Crypto Leverage Return From the Wilderness
In the mid-2010s, the CFTC started to crack down on unregistered exchanges offering margin contracts on crypto. This led most platforms to pull derivative products from the U.S. market, leaving few routes for traders to access them.
Initially, CME Group maintained a monopoly on regulated margin contracts for Bitcoin and Ether. But these were mainly aimed at large, institutional players, with a standard contract size of 5 BTC or 50 ETH.
[SRC] https://finance.yahoo.com/news/historic-day-crypto-com-pham-104715190.html
