The concept of perpetual futures has become a cornerstone of the crypto financial landscape, but according to DRW CEO Don Wilson, common misconceptions surround this product. In a series of social media posts, Wilson clarified that perpetual futures, or 'perps,' are essentially futures contracts without an expiration date.
Features 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 the true nature of perpetual futures is often misunderstood, with many characteristics attributed to them being a result of exchange-specific design choices rather than the product itself.
As interest grows in introducing perpetual futures into regulated U.S. markets, Wilson's comments are particularly relevant.
He advocates for a distinction between the contract and its implementation, suggesting that technological advancements can improve risk management without necessitating high leverage or specific liquidation mechanisms. Wilson proposes that perpetual futures can be beneficial across various markets, including commodities, securities, and crypto, by reducing transaction costs and allowing for more accurate tracking of futures curves.
He urges regulators to focus on the economic substance of perpetual futures rather than their legal classification, arguing that they should be treated as futures contracts rather than swaps due to their economic equivalence.