How Will Crypto Derivatives Evolve With Current Regulatory Challenges?

Author: Mustafa Mulla

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Mustafa has been writing about Blockchain and crypto since many years. He has previous trading experience and has been working in the Fintech industry since 2017.

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While spot crypto trading has been prominent for years, new digital assets emerge within the industry every year.

One asset in particular that has gained increasing popularity is crypto derivatives trading, allowing traders to profit from speculating on price movements of a crypto token rather than buying it outright.

However, despite the popularity, Crypto derivatives trading has also been controversial, especially with regulators.

In the United Kingdom, crypto derivatives have been banned outright. Even top dogs in the industry like Binance have had to shut down operations in several countries due to regulatory issues. 

We sat down with Marcus Fetherston, Head of Operations at Eightcap, a multi-award-winning global broker, to discuss the regulatory landscape in the crypto derivatives market. 

Eightcap is a CFD and FX provider that has rapidly expanded after being founded in 2009. The broker has recently rolled out one of the most extensive crypto derivatives offerings with an impressive suite of over 250 crypto derivatives.

The company also made headlines earlier this year when, amidst many of its contemporaries rolling back operations due to regulatory issues, Eightcap announced even more CFD products. 

Q: While your company offers clients access to a wide range of financial instruments, crypto derivatives seem to be one of your top offerings.

Why do you think they have become so popular in the industry in the last few years?

Not only have we seen continued growth in ICO’s but we have also seen an expansion in new blockchain investment products such as dApps and NFTs.

As crypto has continued to gain increasing popularity, there has also been substantial volatility in the crypto derivatives market over the past few years.

We have seen crypto derivatives move into downward trends and sideways markets this year. Bitcoin has had an impressive year, and we’ve seen it reach its all-time high this November when it hit $68,000.

This could be the start for Bitcoin, as crypto experts have predicted that we could see it hit $100,000 soon. Not only has Bitcoin seen vast amounts of volatility, more altcoins are now gaining traction and also making notable movements in the market.

Dogecoin is a great example of a cryptocurrency derived from a joke that has shot up by 2804.75% and has been experiencing price fluctuations since then.

Both rising and falling prices present an opportunity for crypto derivative traders to take advantage of volatility. This is ultimately why crypto derivatives have become so popular in the last few years.

The fact that derivatives traders don’t need as much capital to open positions on the crypto derivatives market is the icing on top. 

Q: Why do you think there is so much friction between the crypto derivatives sector and regulators, especially since the response is not the same around the globe?

El Salvador has been the first country to accept Bitcoin as a legal tender. However, we are still seeing authorities around the world approach the topic of cryptocurrency with caution.

In that regard, we could be a long way off from seeing Bitcoin and other cryptocurrencies adopted as a legal tender in other countries.

China, for instance, clamped down on cryptocurrency in June this year, which shook the price of Bitcoin. Also, in the same month, the United Kingdom stopped Binance from offering its products.

Currently, there isn’t a set of guidelines to prevent fraudulent behaviour when using cryptocurrency. On the other hand, this could change very shortly, especially as the International Monetary Fund has outlined a proposal for establishing a global regulatory framework for cryptocurrency. 

As crypto continues to evolve over the coming years, it will be interesting to see the correct way to regulate digital currencies.

We are on the right path to open up the discussion now, and I think regulatory bodies will start to see the benefits of the underlying technology behind cryptocurrencies. 

For crypto derivative traders, in particular, it is crucial to open trading accounts with a derivatives provider that is regulated and licensed.

We are regulated in multiple jurisdictions, providing traders with the peace of mind that they are dealing with a reputable crypto derivatives broker. 

Q: Eightcap has one of the largest selections of crypto derivatives in the industry. Why did the company choose to offer so many?

We noticed a lack of variety in the industry paired with providers that had wide spreads when trading crypto derivatives.

We wanted to step in with a solution and essentially build a new home for crypto derivatives traders. That’s why we rolled out over 250 crypto derivatives, including altcoins, crypto-crosses and crypto-indices, all paired with ultra-low spreads.

For example, clients can trade Bitcoin with spreads from 12p/coin, Cardano from 0.004 p/coin, Dogecoin from 0.0002 p/coin and Ether from 0.45 p/coin, to name a few.

Then there are also the derivatives providers with a good range of products but are unregulated, which ultimately is a risk.

Eightcap, on the other hand, is regulated by the Australian Securities and Investments Commission (ASIC), the Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC) and the Securities Commission of The Bahamas (SCB).

We wanted to make derivatives trading accessible. It takes as little as $100 to open an account with us. We also offer our clients various payment methods to deposit and withdraw their funds, including BTC, Tether, PayPal, Credit/Debit Card, Bank Wire Transfer, Neteller, Skrill and much more.

Even though we have launched one of the largest crypto derivatives offerings in the industry, we still want to ensure we are giving our clients the complete package when trading with us. Part of that is the wide range of educational resources that we offer.

We are committed to making sure that our clients are fully prepared before entering the crypto derivatives market. Therefore, we offer free educational resources such as webinars, eBooks and an extensive library of crypto market updates and insights. 

Q: How can customers access derivatives services through Eightcap?

Clients can access over 500 financial instruments with Eightcap via the award-winning MT4 and MT5 platforms. They need to apply for an Eightcap trading account which can be completed in minutes.

Filling in a form and submitting identification documents is an essential part of the process. Once this has been checked and approved, we then send clients their login details to access the client portal, so they can deposit money and access the market. 

Q: How does Eightcap comply with current regulations to provide derivatives services to customers? 

We have stringent KYC measures in place when we onboard our clients and ensure that we are compliant with current regulatory requirements at all times.

As mentioned previously, we are regulated in multiple jurisdictions, allowing us to provide derivative products to our clients. 

Q: What do you think is the long-term solution to these regulatory issues? 

As we advance, we need to watch how the crypto derivatives market evolves. The benefits of using the technology that crypto is built on are phenomenal.

There is an increased amount of volatility in the derivatives market, which is another reason why there are challenges with regulation.

Volatility will always be there, especially with many factors affecting the price of certain crypto derivatives, but this can be said for traditional financial instruments also.

For example, forex trading is another financial market that has seen substantial volatility over the years.

We are working on enhancing our crypto derivatives even further to stay in line with regulatory changes and still meet the demands of crypto derivatives traders. 

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Mustafa Mulla

Mustafa has been writing about Blockchain and crypto since many years. He has previous trading experience and has been working in the Fintech industry since 2017.

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