The concept of perpetual futures has become a cornerstone of crypto finance, but according to DRW CEO Don Wilson, common perceptions about them are misguided. In a series of posts, Wilson explained that perpetual futures, or 'perps,' are essentially futures contracts without an expiration date. Characteristics often associated with crypto perpetuals, such as high leverage and auto-deleveraging, are not inherent to the contracts themselves but rather a result of how some crypto exchanges have chosen to implement them. Wilson emphasized that most of what people think they know about 'perps' is unrelated to the contract itself.
His comments come at a time when there is growing interest in introducing perpetual futures into regulated US markets. Several exchanges have explored launching perpetual futures beyond crypto, but questions remain about how these products should be regulated. Unlike traditional futures markets, crypto exchanges operate continuously and use digital collateral, allowing for real-time margin calculations and higher leverage. Wilson argued that these design choices should not be confused with the nature of perpetual futures.
Instead, he suggested that digital payment systems can enhance risk management by enabling real-time settlement and reducing the need for large initial margin buffers. Wilson believes that the true innovation of perpetual futures lies in their ability to eliminate the need for investors to repeatedly roll over expiring contracts, thereby reducing transaction costs and allowing positions to more closely track the front of the futures curve. He urged regulators to focus on the economic substance of perpetual futures rather than their legal classification, arguing that they should be treated as futures, not swaps.
Ultimately, Wilson advocated for the broader availability of perpetual futures across various markets, including commodities, securities, and crypto, seeing them as a valuable tool for price discovery and risk management.