With the end of MiCA’s transitional period fast approaching, the European Union is finally cracking down on unlicensed crypto exchanges in an effort to purge the continent’s spot markets of rogue operators and protect European investors. But a dangerous loophole remains wide open that could whisk users away from regulated spot trading and into high-risk offshore derivatives platforms likely to wipe out their capital.
Regulators in the EU have set a July 1 deadline for unauthorized crypto asset service providers to wind down operations, but the enforcement crackdown only applies to spot trading. Crypto derivatives, including perpetual futures (also called “perps”), are not covered under MiCA’s jurisdiction.
That would be a defensible position for regulators to take if perps were a harmless product that was carefully policed by another authority. They’re neither. The majority of crypto trading volume — roughly 80% as reported by data from Glassnode — takes place in the crypto perpetual futures market. A crypto perpetual is effectively a contract of difference. Traders post margin and take leveraged directional exposure to a price they never actually own. The difference between those prices is then settled in cash.
Patrick Gruhn is founder and chief executive of Perpetuals.com.
