Crypto exchange FTX awaits green light from regulators to let individual investors use derivatives. The same would allow them to bet on cryptos such as Bitcoin with leverage. However, the stock market’s rivals, along with stalwarts from the traditional financial landscape, have opposed the case.
According to them, the stock exchange’s proposal would pose a threat to market stability. FTX has suggested that investors can trade directly with the exchange to trade instead of going through brokers. However, the mentioned approach represents a “Modifyof the way derivatives markets have worked for decades, and hence the opposition.
Read more: FTX’s Sam Bankman-Fried Says He Has More Than $2 Billion To Help With Crypto Deals
Lobbying at FTX is underway
FTX’s executive Sam Bankman-Fried continues to make his side of the matter strong. Time and again, he has argued that the proposal would bring the latest technology to US markets. In fact, he has also claimed that the stock market has safeguards to mitigate risk.
In a Wall Street Journal interviewsaid Bankman-Fried,
“We are going to implement a more complete set of customer protections, disclosures and fitness checks than currently exists in the futures industry.”
He added,
“If anything, we’re going a little overboard there.”
Does Bitcoin pose a realistic threat to FTX’s proposal?
On the macro frame, Bitcoin’s estimated leverage ratio is rising. This basically suggests that derivatives traders have taken more risks to cash in on the state of the market. However, there have been several instances in the recent past where they have tasted the bitter drug of the market when volatility has increased.
Read more: Even if $5 million in Bitcoin and alts are stretched, investors will remain “bullish”; This is why
Now, according to the opponents, getting a green flag for FTX would be quite detrimental because of the same. They have emphasized that inexperienced and naive market participants should be shielded from the volatility of the derivatives market. For its part, FTX has claimed that it is committed to protecting investors.
Well, Bankman-Fried is a relative newcomer to lobbying in Washington. And the said proposal is more of a litmus test for him and his exchange.
Read more – Is there a Goldman Sachs-FTX partnership?