Crypto wallet providers Fantom and the Hyperliquid Policy Center have urged the US Commodity Futures Trading Commission (CFTC) to exempt blockchain protocol developers and non-custodial wallet providers from rules designed for traditional financial intermediaries.
In response to the CFTC’s request for information on rules affecting fintech firms, the firms asked the agency to confirm that blockchain protocol developers are not required to register simply for creating onchain software, issue guidance to allow regulated derivatives firms to use blockchain infrastructure, and codify an exemption preventing non-custodial wallet providers from treating them as origination brokers.
The companies argued that existing CFTC rules were designed for custodial financial intermediaries that hold clients’ assets and process trades, while onchain protocols allow users to transact directly without intermediaries controlling funds or executing orders.
Letter to CFTC. Source: hyperliquidpolicy.org
He said registration requirements should apply to entities that handle customers’ funds or execute trades, not developers who create blockchain software or contribute to open-source protocols without controlling the use of the software.
The groups also asked the CFTC to clarify that registered derivatives exchanges, clearinghouses and intermediaries can use onchain infrastructure for functions including trade execution, clearing, settlement, margining and recordkeeping, provided they continue to comply with existing rules.
The groups said the alternative to adopting the recommendations is the status quo, which “keeps U.S. users away from onchain derivatives markets,” while innovation continues overseas.
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Regulatory debate over onchain derivatives intensifies
The letter comes as crypto companies and traditional exchanges are pressuring US regulators over how blockchain-based derivatives should be regulated, with both sides wanting more clarity on the agency’s approach.
In May, Intercontinental Exchange and CME Group reportedly urged regulators to investigate Hyperliquid’s expansion into commodity-linked perpetual futures, arguing that the decentralized platform’s energy derivatives posed market integrity and manipulation risks.
Two weeks later, ICE CEO Jeffrey Sprecher called for a “level playing field” that would allow regulated exchanges to offer onchain perpetual futures 24/7, saying that existing rules were preventing traditional exchanges from competing with platforms like Hyperliquid. Sprecher also said that ICE has had exploratory discussions with Hyperliquid to better understand the onchain derivatives markets.
Meanwhile, CME continues to expand its own regulated crypto derivatives business. This year, the exchange announced Avalanche and Needle-linked futures, launched CFTC-regulated Bitcoin volatility futures and introduced Nasdaq CME Crypto Index futures, a market-cap weighted contract tracking seven digital assets.
Despite that extension, CME sued the CFTC in June over the agency’s approval of crypto perpetual futures, arguing that the regulator exceeded its authority under the Commodity Exchange Act.
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