HPC Proposes Regulating Perpetual Futures Under MiFID II

The Hyperliquid Policy Center (HPC) has submitted a proposal to the European Commission to regulate perpetual futures of cryptocurrencies under MiFID II, rather than the Markets in Crypto-Asset (MiCA) regulation.

MiFID II is an existing EU financial regulation that targets financial instruments such as stocks, bonds, and derivatives. HPC argues that regulating perpetual futures under MiFID II would change the scope of regulation, supervisory bodies, and investor access.

Perpetual futures are a type of derivative product where no expiration date is set. They allow traders to profit from price fluctuations without holding the underlying asset. HPC notes that the economic characteristics of perpetual futures align with those of MiFID II-regulated financial instruments, such as standardized cash-settled derivatives.

HPC also cites a European Securities and Markets Authority (ESMA) guideline that considers the economic characteristics of a product rather than its recording method when classifying it. The HPC proposes applying this principle to perpetual futures regardless of their recording method or reference asset.

However, ESMA has previously suggested that perpetual futures could be subject to existing CFD regulations if they meet certain criteria. HPC disagrees with the blanket application of these regulations to perpetual futures and instead proposes specific rules for each product.