Ondo Finance, a financial company that focuses on tokenizing assets through the implementation of blockchain technology to manage assets, stocks, and virtual assets, asks the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) to lift restrictions on perpetual futures.
Ondo: A Brief Background
The company operates on a distinct business model unlike other asset management platforms; it integrates blockchain technology to decentralize and ‘tokenize’ said assets—meaning this converts ownership or economic rights of real-world or digital assets into blockchain-based digital tokens, enabling fractional ownership, enhanced liquidity, and programmable financial operations.
Perpetual Futures
Perpetual futures refer to speculative trading on an asset’s future value. Unlike normal futures that have a set expiration date, the perpetual aspect of futures means that there is no set expiration date. It is especially relevant to tokenized companies like Ondo because perpetual futures exploit the lack of expiration dates to navigate volatility. Therefore, it is in Ondo’s interest—and that of other similarly designed companies—to lobby for legislation. This is why perpetual futures are a benefit to Ondo.
Restrictions
Current U.S. restrictions currently operate on a case-by-case basis review if a perpetual asset is that tethered to a different token other than Bitcoin (BTC) or Ethereum (ETH); for companies like Ondo that trade with tokenizing other assets, this provides a hurdle to the addition and execution of perpetual futures for its assets under management. Specifically, it requests the SEC and CFTC to ” lift the ban on perpetual futures with individual stocks as reference assets in the United States”.
Broader implications should the restrictions be lifted will be the exponential evolution of perpetual futures in the U.S. economy; it is still a novel concept that is marred by oversight and restrictions. For Ondo, this ties directly to its potential growth and a green light to the diversification of assets considered as perpetual futures; again, these are stocks that are tethered to BTC and ETH. Freeing the restriction allows Ondo to use other tethers or tokens to anchor stocks.
Implications
Ondo is a blockchain-enabled company, and as such, it represents other similar financial institutions. Its open letter to the SEC and CFTC is a reflection of the market’s desire to free up the haze surrounding perpetual future trading. Time will tell if the SEC and CFTC grants Ondo’s request—and as governance tells, the SEC and CFTC need not Congressional, Senate, and Executive approval to pass laws; they are apolitical agencies.
