By Alicia Maher
One of the top-level executives of the Netherlands financial markets authority, Paul-Willem Van Gerwen, recently shared his insights on crypto derivatives trading. While speaking at the recently concluded Amsterdam Property Traders/Managers conference, Van Gerwen disclosed that crypto derivatives trading shouldn’t be allowed for retail investors.
He claimed that retailers don’t have what it takes to be involved in the risks associated with crypto derivatives trading, such as market manipulation and fraudulent financial transactions. He added that the lack of transparency and several other illegal market activities makes crypto derivatives trading too risky for retail traders.
Van Gerwen’s Opinions Represent A Widely Accepted View About The Crypto Market
Generally, these reasons are the same ones cited by some authorities on why they can’t allow crypto operations in their country. It has to be noted that lack of transparency is peculiar to all financial industries and not just the crypto industry.
However, market manipulation is more rampant in the crypto space than in any finance-related sector. Van Gerwen also opined that there is a vast difference in the market’s maturity levels and understanding of derivatives trading.
“I believe that other derivatives markets have reached greater heights of maturity than the crypto derivatives market. Despite their fast growth and potential benefits, the volatility and level of risks associated with the crypto derivatives market are too huge for retailers to handle.”
Hence, the Dutch financial official suggested that wholesale traders should be the only ones allowed in crypto derivative trading. He cited the example of the UK’s FCA banning retailers from being involved in crypto derivatives and suggested that other nations take a cue from the UK’s decision. Van Gerwen shared his insights on blockchain technology and stated that technology is overhyped as it is not as magnificent as many analysts claim.
The Crypto Derivatives Market Is Still Popular
Crypto derivatives trading remains a hugely popular market despite being risky investments in which traders can incur huge losses. This market’s popularity is such that top institutional investors such as Goldman Sachs have been making a foray into it.
The global investment bank recently launched its maiden otc crypto trade for the derivatives market. Some crypto participants, such as FTX founder, Sam Bankman-Fried, have argued that the derivatives market offers liquidity and enhances the efficiency of the broader crypto market.
Many crypto exchanges are planning to explore the derivatives market
FTX US has announced that it will launch its derivatives trade before this year is over, while Coinbase has already filed for it. However, US legislators agree that the US Commodity Futures Trading Commission (CFTC) is the sole regulator to oversee the crypto derivatives market. Hence, any crypto exchange planning to launch its derivatives trading must seek approval from the CFTC before going ahead.
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