The concept of perpetual futures has become a cornerstone of crypto finance, but DRW CEO Don Wilson believes that common perceptions about them are misguided. In a series of posts, Wilson clarified 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 a result of how some exchanges have chosen to implement these products, rather than inherent features of the contracts themselves.
Wilson's comments come at a time when there is growing interest in introducing perpetual futures into regulated US markets. Several exchanges are exploring the launch of perpetual futures beyond the crypto space, but questions remain regarding their regulation and whether they fit within existing frameworks.
Unlike traditional futures markets, crypto exchanges operate continuously and utilize digital collateral, allowing for real-time calculation of margin requirements. Wilson emphasized that these design choices should not be confused with the nature of perpetual futures. Instead, he argued that digital payment systems can enhance risk management by enabling continuous margin recalculation and immediate collateral posting, reducing the need for large initial margin buffers. Wilson also highlighted the innovation of perpetual futures in eliminating the need for repeated contract rollovers, thereby reducing transaction costs and allowing positions to more closely track market trends.
He urged regulators to focus on the economic substance of perpetual futures rather than their legal classification, stating that they should be treated as futures, not swaps, and made available across a broader range of markets.