The report from the White House takes aim at Bybit – and forgot about Deribit

The White House released its annual economic report on March 20, and it dedicated an entire section to digital assets.

The authors should be commended for doing so. I largely agree with the report’s assessment that certain aspects of the digital asset ecosystem create problems for consumers, financial systems and the environment.

However, as a developer in the digital asset space, I could not disagree more with the conclusion that “crypto-assets do not currently offer widespread financial benefits.”

To understand how the White House plans to regulate digital assets, it’s important to examine what was left out of the White House report. One particularly off-topic piece of data that made the report was a list titled “Top Ten Crypto Derivatives Platforms by Open Interest.” It included offshore exchanges including BingX, Deepcoin and BTCC Futures.

While most digital asset advocates agree with the report that these exchanges are not reputable in any way, and open interest is a trivially easy metric to manipulate, that’s neither here nor there. The real issue is why the White House report chose to focus on offshore exchanges that have no checks and balances and aren’t even open to US-based users.

What is more revealing is the fact that they choose to completely ignore the largest derivative product available to US-based users, one that has been vetted and approved by the Commodities Futures Trading Commission to launch in a safe and regulated manner: Bitcoin (BTC) and Ether (ETH) futures offered by the Chicago Mercantile Exchange (CME).

Related: What Paul Krugman Gets Wrong About Crypto

CME is a fully compliant entity with all US laws and regulations and with the recent launch of Micro Bitcoin and Micro Ether futures, has enabled retail investors to access a safe, regulated and US-based futures derivative product. .

Why would they choose to leave out the mention of CME?

Could it be because the CME can only list commodities, questioning the Securities and Exchange Commission’s position that ETH is a security?

Furthermore, none of the platforms mentioned by the White House have any name recognition among crypto-native investors. While this can be attributed to the fact that there are relatively few derivatives exchanges in the market and none of these exchanges seem to have filled the void left by FTX, another omission is very telling.

The White House report also fails to mention Deribit, the largest options exchange by volume and open interest. Based in the Netherlands, but unavailable to US users, the company is focused on education and outreach and is far more transparent than most on the market. So why wasn’t it included?

The White House is intentionally excluding all legitimate businesses from its list of derivatives platforms, a position likely taken to paint digital assets as shady, unsafe assets.

Derivatives, such as futures and options, are a core component of any financial system. The United States – and the White House – will benefit from a thriving digital asset economy that includes derivatives and options markets. And I agree that the stocks listed in the White House report are indeed quite risky.

But what the White House is missing is that there is a better alternative, one that can no longer be swept under the rug and one that is transparent, non-custodial, cryptographically secure and completely open source: decentralized finance (DeFi).

DeFi is completely custody-free and has no middlemen, so there are no “entities” to regulate because users are always in control of their money. In addition, most DeFi use security requirements and limit access to leverage: All lending protocols are oversubscribed, and the balance can be immediately audited, unlike fractional reserves.

Related: Did regulators intentionally cause a run on the banks?

The lack of regulatory clarity from the US SEC and CFTC stifles innovation in the derivatives space.

Most DeFi protocols can and should plan to follow the guidelines of self-regulatory organizations such as the Financial Industry Regulatory Authority to protect all users. Clearly stated regulations have a place in any industry, but regulation by enforcement stifles innovation. I see this firsthand as a builder in the digital asset space, and the lack of clarity makes it impossible for some US-based entities to enter the US market.

Advocates of digital assets are familiar with previous financial crises. Most of us lived through the hell that unfolded after 2008 due to banking deregulation. Our aim is to rebuild the financial infrastructure from the ground up, in the most transparent way and safest possible way. DeFi is supported by mathematically unbreakable encryption, and centralized exchanges based offshore are this generation’s shadow banks.

Builders in the DeFi space wishes to create the safest financial system in history. We want to empower global citizens, not private banks or runaway financiers.

And despite what US regulators may think, we are willing to cooperate with governments, central banks and regulators. We just need to know that you are arguing in good faith.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.