Can Ether Futures Silence the Naysayers?

Ethereum (ETH) led the cryptocurrency market higher on Monday amid reports that the Commodity Futures Trading Commission (CFTC) is willing to approve an ether futures product, provided it meets certain regulatory guidelines. The so-called developer’s cryptocurrency has lagged bitcoin (BTC) and the broader market this year amid growing competition for faster and more scalable blockchains.

Ether Futures?

A CFTC insider has revealed that the U.S. regulator is open to the idea of an Ethereum-based futures contract, provided that it meets certain guidelines. The CFTC is not one to make bold proclamations about which asset it will support in the future but there does appear to be plenty of scope for an ether derivatives contract being approved.

The decision to grant an ETH-based futures contract wouldn’t be out of the ordinary, either, as the CFTC has already approved derivatives contracts tied to bitcoin, its much larger peer. In December 2017, the Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange (CME) both launched their own version of a bitcoin futures contract. Back in March, CBOE announced it does not intend to list any additional bitcoin futures beyond June but didn’t close the door completely on the digital asset class.

The hope is that, by granting an Ethereum-based futures contract, the CFTC would open the door to greater institutional adoption of the second-largest cryptocurrency. Interest in the CME bitcoin futures contract has certainly grown over time, but the big mass adoption phase hasn’t happened quite yet. Still, if the CFTC does pave the way for ether futures, the next step could be approval of a digital currency exchange-traded fund (ETF). To get there, fund issuers must satisfy the U.S. Securities and Exchange Commission (SEC), which has refused to grant any crypto ETFs.

Bitcoin and Ethereum hold a special status for regulators because, unlike their competitors, they are considered to be “sufficiently decentralized.” This provides some reassurance that the largest digital assets are here to stay, although this appears to be truer for bitcoin than Ethereum.

Addressing the Critics

The Ethereum network has been under constant attack by industry leaders who believe the platform doesn’t have much staying power. Not only do they take issue with the notion that ether is money, some of them believe the protocol will die a slow death via economic abstraction.

In crypto speak, economic abstraction refers to gas payments made in a non-ETH asset, which would eventually render the coin obsolete or practically worthless. If an ERC-20 project running on Ethereum needed to sell its token for ether to facilitate its own transaction, then the selling will likely occur before the transaction needs it.

Ethereum co-founder Vitalik Buterin has responded to these criticisms, arguing that the protocol will not do “full economic abstraction” in the future. He also says Ethereum’s development team is already considering competing proposals that would require ether to be paid at the protocol level.

Ethereum’s proponents believe the network’s path to Serenity could quell some of the criticism. The network underwent two successfully upgrades in February – Constantinople and St. Petersburg – paving the way for the implementation of a full proof-of-stake consensus algorithm. If Ethereum really is the smart contract and decentralized application platform of the future, that will come to light after Serenity.

Also read: Has Ethereum (ETH) Broken the Curse?

Since bottoming in December, Ethereum’s price has more than doubled in value. It was the market’s top performer on Monday, reaching a high near $176.00, according to CoinMarketCap.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi