Wall Street plans to write to regulators to boycott Bitcoin futures

As Bitcoin futures are about to be launched, opposition from Wall Street is growing louder.

According to the Financial Times, the Futures Industry Association (FIA) plans to write to the Commodity Futures Trading Commission (CFTC) to express their opposition to the launch of Bitcoin futures. As the main lobbying organization in the US futures industry, FIA members include a large number of banks. In their view, the US financial system is not yet ready for the launch of Bitcoin futures.

The FIA ​​letter will be officially released on Thursday, but the Financial Times has seen a draft in advance. According to the report, the FIA ​​said in the letter that the hasty launch of Bitcoin futures did not achieve sufficient transparency and public opinion. "Before issuing the license to launch these products, we believe that the risk assessment committees of all relevant exchanges were not consulted."

Since the beginning of this year, the price of Bitcoin has continued to soar. In the early morning of Beijing time today, data from the US trading platform GDAX showed that Bitcoin hit a record high of $14,250. In the past two days, it has broken through three integer levels of $12,000, $13,000, and $14,000. In less than 24 hours, it has risen by more than $2,000.

As the price soared, the market value of Bitcoin also surpassed the market value of well-known listed companies such as Netflix, Morgan Stanley, Goldman Sachs, Disney, and General Electric, and exceeded US$200 billion in the early hours of yesterday. According to CoinMarketCap data, the latest total market value of Bitcoin has reached US$239 billion.

The skyrocketing momentum of Bitcoin has brought benefits to many investors, but for formal financial institutions, they still have no suitable channels to participate. In order to solve this "pain point", the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (Cboe) have started to compete openly and secretly on the track of launching Bitcoin futures.

CME released a "preview" on its official website as early as October this year, and announced on December 1 that it would launch Bitcoin futures trading on December 18 after the CFTC review. At that time, Cboe's attitude was "the product is still under review, and we will give you a satisfactory answer soon."

On December 5, Cboe also unveiled its product, which was launched a week earlier than CME. According to Cboe’s announcement, its Bitcoin futures will be officially listed and traded on Cboe’s Futures Exchange (CFE) on December 10.

During the launch of Bitcoin futures, a noteworthy detail is that the pricing benchmark used by the futures contracts stipulated by CME is the Bitcoin Reference Rate (BRR) set by CME itself.

How is this BRR derived? A previous article in Wall Street Journal’s Editor’s Picks mentioned that this reference price is calculated from the weighted average price of the transaction prices of several Bitcoin exchanges, including Bitstamp, GDAX, itBit and Kraken, but it does not include the transaction price of Bitfinex, the world’s largest and most liquid exchange.

Obviously, CME may do this because it does not want the transaction of "physical" Bitcoin to influence and dominate the futures price (after joining Bitfinex, due to its great weight, the price will be dominated by the transaction price of the platform). Instead, it hopes to use futures trading to influence the price of Bitcoin, and then "control" the price of Bitcoin, which is outside the traditional financial system but has financial attributes, through transactions in the traditional financial system.