Cryptocurrency Pushing Into Regulated Derivatives Sector

On the heels of the popularity of cryptocurrency trading, digital asset companies are knocking on the doors of the highly regulated United States derivatives markets, the Financial Times reported.

The push comes as crypto derivatives recorded nearly $3 trillion in January. That’s more than 60% of trading in cryptocurrencies, according to U.K.-based crypto data provider CryptoCompare.

Most of the trading activity takes place offshore by Binance, one of the world’s largest crypto exchanges, with little oversight. But crypto companies are seeking to expand in the highly supervised U.S. market by purchasing smaller companies that hold licenses to operate.

Coinbase, another giant crypto platform, recently agreed to buy FairX, the Chicago futures exchange, to make the derivatives market more accessible through its app.

Last year, Crypto.com paid $216 million for two retail businesses from the U.K.’s IG Index, the London-based company that offers spread betting on financial markets under the supervision of the Financial Conduct Authority.

Rosario Ingargiola, founder and chief executive of Bosonic, a crypto settlement service for institutional investors, told the news outlet that in the U.S., crypto exchanges can’t offer leverage on spot crypto without being a regulated futures commission merchant.

“It’s a big part of why you see larger crypto exchanges buying [Commodity Futures Trading Commission] (CFTC)-regulated platforms that allow offering of derivatives like options and futures to retail clients, because there is huge demand … for leveraged,” Ingargiola said.

Earlier this month, CFTC Chairman Rostin Behnam made an aggressive pitch for authority over the cryptocurrency market in testimony before the Senate Agricultural Committee.

See also: At Senate Hearing, CFTC Chair Behnam Steps Up Battle With SEC for Crypto Oversight

While he acknowledged the agency lacks the expertise to handle the job today, Behnam asked for an additional $100 million to build a regulatory machine suitable to the job.