Phantom, Hyperliquid Urge CFTC to Modernize Onchain Derivative Rules

Phantom and Hyperliquid, two entities involved in the digital asset space, have formally requested that the U.S. Commodity Futures Trading Commission (CFTC) modernize its regulatory framework for onchain derivatives. The companies submitted their joint proposal this week, urging the regulator to distinguish between traditional financial intermediaries and participants in the decentralized finance (DeFi) ecosystem.

Specifically, Phantom and Hyperliquid are advocating for exemptions from certain rules that were designed with centralized exchanges and custodians in mind. They argue that blockchain developers and non-custodial wallet providers, which do not hold customer assets in the same manner as traditional financial institutions, should not be subject to the same stringent oversight. This distinction, they contend, is crucial for fostering innovation within the onchain derivatives market without compromising investor protection.

The proposal highlights the unique nature of decentralized platforms, where control and ownership of assets remain with the user. By exempting these entities, the CFTC could encourage the development of more sophisticated and accessible onchain financial products. The companies believe that a tailored regulatory approach will better serve the evolving landscape of digital asset markets and prevent the stifling of legitimate innovation.