Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on the day's biggest business stories

Subscribe to Axios Closer for insights into the day’s business news and trends and why they matter

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Stay on top of the latest market trends

Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sports news worthy of your time

Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tech news worthy of your time

Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Get the inside stories

Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Axios on your phone

Get breaking news and scoops on the go with the Axios app.

Download for free.

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Denver news?

Get a daily digest of the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Des Moines news?

Get a daily digest of the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Twin Cities news?

Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Tampa Bay news?

Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Charlotte news?

Get a daily digest of the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sign up for Axios NW Arkansas

Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Rae Cook/Axios

Coinbase got the headlines this week for going public, but another crypto category is also booming: derivatives exchanges.

Why it matters: These exchanges are taking crypto investor appetite for speculation to the next level, enabling bets on a range of events and assets — even Coinbase’s own IPO, months before the actual float.

The big picture: “The defining companies in crypto are the exchanges,” says FTX CEO Sam Bankman-Fried, whose two-year-old company has become one of the most popular derivatives exchanges. “That’s not necessarily true on Wall Street.”

  • Unlike in traditional finance, crypto exchanges provide services end-to-end, including the wallet, asset custody, matching engine and so on, putting them at the center of the industry's activity.
  • Coinbase, for example, started out as a digital wallet for storing and transferring bitcoin, and over the years added an exchange to trade digital tokens — while building out the services needed to support that.

Between the lines: The growing popularity of crypto derivatives, which are largely based abroad due to regulations, comes down to capital efficiency, according to Bankman-Fried.

  • Users can put up all kinds of collateral, and get tons of leverage, 100x up to 125x, depending on the exchange.
  • FTX also managed to harness some of the stock market zeitgeist, debuting futures ahead of the public listings of companies like Airbnb, Coinbase, and most recently Robinhood. It also launched tokenized stock for Tesla, and a WallStreetBets index quarterly futures contract during the retail trading saga in January.

And that translates to big business for the exchanges.

  • Bitmex, a rival exchange founded in 2014 and derivatives trailblazer , was handling about $65 billion a month in trading volume by the summer of 2020, according to Bloomberg.
  • FTX (which also runs a spot exchange) saw roughly $10 billion in trades per day in April, raking in about $2 million in daily revenue from fees. The company says it currently has an $800 million run rate.
  • And according to FTX’s own tracking of other exchanges, there’s just under $100 billion in derivatives trade per day on Binance, over $78 billion on Huobi, and about $36.5 billion on OKEx.

Yes, but: Like much of the rest of crypto, the lack of a clear regulatory regime in the U.S., especially with regards to newer derivatives like tokenized stock, is keeping crypto derivatives exchanges from being able to operate here.

  • The CTFC has signaled that crypto derivatives fall within its jurisdiction, but is still behind on providing new rules and regulations.
  • U.S. residents can still trade some very limited derivatives, like bitcoin futures, via a few large regulated exchanges like the Chicago Board Options Exchange and the CME Group exchange.

Meanwhile, Bitmex has run afoul U.S. regulators for allegedly soliciting American customers without being licensed. But, again, there is no license to get.

  • CEO Arthur Hayes and three others also face criminal charges for failing to implement sufficient anti-money laundering measures, and knowing of certain illicit activities.
  • The CFTC is also reportedly probing Binance for letting U.S.-based users to trade derivatives.

The bottom line: We've entered a new era of cryptocurrency exchanges.

Go deeper

22 mins ago - World

Putin calls Biden summit "constructive," says ambassadors will return to posts

Putin at the summit with Biden. Photo: Mikhail Metzel\TASS via Getty Images

Russian President Vladimir Putin said Wednesday that his summit with President Biden was "constructive," and that the countries had agreed their ambassadors would imminently return to their posts in Moscow and Washington.

What he's saying: "Many of our joint positions are divergent but nevertheless I think both sides manifested a determination to try and understand each other and try and converge our positions," Putin told reporters at a press conference immediately following the meetings, according to a translator.

Updated 27 mins ago - World

Live updates: Putin holds press conference after Biden summit concludes

President Biden met with Russian President Vladimir Putin in Geneva for less than four hours of talks on Wednesday, a highly anticipated summit that comes as both sides say U.S.-Russia relations have sunk to a new post-Cold War low.

The latest: The summit concluded at about 11:15 a.m. ET, according to the White House. At a press conference, Putin called the talks "very constructive' and announced that the U.S. and Russia's respective ambassadors would return to their posts. Biden is expected to deliver his own press conference at 1:30 p.m. ET.

Southwest heat wave intensifies, breaks records and worsens drought

A temperature "misery index" shows peak levels across the Southwest (orange and yellow), and the upper air flow shows how the jet stream is being pushed north, away from the heat dome parked over the Four Corners region. (Earth.nullschool.net)

A punishing and long-enduring heat wave is intensifying in parts of the West and Southwest, with heat warnings and advisories in effect across seven states Wednesday. The heat will not relent until late in the weekend.

Threat level: In the coming days, 40 million are likely to see temperatures reach or exceed 100 degrees.