This morning, the Commodity Futures Trading Commission (CFTC) took historic action to allow the listing of a genuine bitcoin perpetual contract by a CFTC-registered exchange. In doing so, the Commission charted a path for one of the most liquid segments of the crypto-asset markets to exist within the US regulatory framework. Having true perpetual contracts in the US is a big step forward in achieving President Trump’s goal of cementing America as the crypto capital of the world.
Unlike a traditional futures contract, which is designed for markets that close overnight and on weekends, a perpetual contract (also known as a “perpetual” or “perp”) is a type of derivative contract that has no fixed expiration date. Instead, counterparties periodically exchange a financing interest payment, equal to the variation margin, designed to maintain relative price parity with the spot price of the underlying asset. In markets that operate 24/7, the lack of an expiration date allows market participants to maintain continuous price exposure without periodic expirations and the associated costs of rolling over contracts.
Perpetual contracts were first theorized in a debate paper published in 1992 by Nobel Prize-winning economist Robert Shiller. Since then, perpetuals have become a fundamental risk management and price discovery tool in the global crypto asset markets.
Yet, despite clear market demand and the CFTC’s statutory obligation to promote responsible innovation, the CFTC has—until now—failed to provide a workable path for perpetual cryptoassets to exist in a compliant manner in the United States.
As a result, perpetual trading activity has predictably taken place offshore. With liquidity fragmented across foreign platforms, US cryptoasset firms were put at a competitive disadvantage and US market participants were effectively barred from accessing these markets.
Under my leadership, the CFTC has taken a different approach. One that is consistent with the CFTC’s mandate to promote responsible innovation and fair competition, and one that is rooted in the belief that responsible innovation requires regulatory clarity.
The Commission’s long-standing, principled oversight of the commodity derivatives market will now include a workable framework for genuine crypto-asset perpetual contracts. This is a framework that can limit excessive leverage, volatility and systemic risk, rather than push those risks offshore to unregulated venues.
While today’s approval of bitcoin perpetual may seem novel, history tells a different story.
For more than a century and a half, America’s commodity futures markets have served as a proving ground for innovation and evolved alongside technological advances. From agricultural futures in the nineteenth century, to electronic trading in the twentieth century and bitcoin futures under Trump 1.0, our markets have consistently adapted to new forms of trading, risk transfer and capital formation. Crypto assets and blockchain-based financial infrastructure represent one of the many next chapters in that story.
In my opinion, the question was never whether there would be perpetual contracts for crypto assets. Instead, the question was whether they would exist under US supervision, US standards and US rule of law.
For too long, bureaucratic regulators approached the new frontier of finance with the assumption that innovation itself represented a threat to the public interest. This deceleration approach resulted in regulation by enforcement and forced American innovators to flee the United States and build beyond our borders.
Fortunately, thanks to the leadership of President Donald Trump, those days are behind us and the US is now the crypto capital of the world. Today’s action for onshore crypto-asset perpetuals was the natural extension of this US achievement and reinforces US leadership in digital financial technology.
Although the work is far from complete, today marks an important milestone.
For the first time, the world’s most sophisticated financial system has opened the door for crypto-assets to operate within its regulated framework. And while Congress has an important role to play in providing long-term regulatory clarity for cryptoasset markets, the CFTC will continue to advance initiatives related to tokenized security, cryptoasset market structure, and prediction markets.
Innovation comes on land.
US crypto active eons are here and the US will continue to lead in this new frontier of finance.
