FTX.US and Coinbase join ISDA: Develop a common standard for the crypto market

Foreign media "Financial Times" reported that ISDA, an international exchange and derivative product organization, said on Tuesday (12/14) that it is developing common standards and product templates for derivatives related to the crypto market. These standards will cover hidden risks, including hacking, forks, and airdrops caused by forks. The formulation of these standards will expand the attractiveness of digital assets to institutions.

The ISDA master agreement is widely used in the global bond, stock, and currency markets as a legal template for transactions. In the unlikely event that an unexpected event disrupts the price of derivatives, market participants usually follow the master agreement and adjust the content of the contract.

ISDA (International Swapand Derivatives Association) was established in 1985 to promote the trading of derivatives. In order to take into account the legal risks of derivatives, ISDA has set preliminary standard contract terms. After simplifying the contract, the counterparties only need to negotiate the transaction according to the transaction conditions, eliminating the need for the processing of signing huge contracts one by one.

ISDA Chief Executive Scott O’Malia stated that the standards and definitions of digital derivatives will be consistent with traditional financial or spot market standards.

"We must respect encrypted assets, treat them as an independent asset class, redefine and draft relevant legal terms."

As the crypto market is becoming more and more active, at the end of September, ISDA has stated that it will develop a cryptocurrency standard and published an article "The First Step in the Standard for Crypto Assets". According to CryptoCompare data, the number of open positions in Bitcoin and Ethereum futures last month reached 4.3 billion and 1.2 billion US dollars, respectively. The derivatives market now accounts for 55% of the crypto market.

FTX.US and Coinbase joined ISDA Association

Following this trend, Coinbase and FTX.US exchanges both joined ISDA last week and became members of the association. At present, there are about 960 members of the association, members from all over the world. Association members are divided into three types: Primary (most banks belong to this category), Associate (professional firms), and Subcriber (asset management companies, securities firms).

This decision is not a surprise to the market. Coinbase's current main business is spot trading, but in order to make up for the lack of derivatives, it has submitted registration with the National Futures Association (NFA) in September and applied to become a merchant of the Futures Commission.

And FTX.US completed the acquisition of LedgerX and obtained three CFTC (Commodity Futures Trading Commission) compliance licenses of LedgerX, including DCM, DCO, and SEF licenses.

Regarding joining the association, the two exchanges did not say much.

Sam Bankman-Fried, the founder of FTX, only expressed on Twitter that he looks forward to cooperating with ISDA and Scott O’Malia and will continue to deepen the derivatives market.

"We look forward to working with ISDA and CEO Scott O’Malia, and we will continue to build crypto derivatives markets in the U.S. and globally."