The China Securities Regulatory Commission's heavy lifting of restrictions: financing, market making, and derivatives launch three arrows at once

This new regulation is based on the core principles of "prudent innovation and controllable risks", which not only breaks the regulatory gap in the financing, market making, and derivative business of virtual assets, but also strengthens the risk defense line through strict rule design. The three major breakthroughs have their own focuses and support each other, building a comprehensive compliance supervision and market development system.

Breakthrough 1: Compliance landing of virtual asset financing, BTC/ETH becoming legal collateral for the first time

The new regulations clarify for the first time that licensed institutions can legally carry out virtual asset guarantee finance business. This is the first time that virtual assets have been recognized as compliant collateral at the regulatory level, filling the regulatory gap in the field of virtual asset credit financing. To prevent asset volatility risks, the new regulations have set strict constraints to ensure the stable operation of financing business.

According to the new regulations, the collateral scope for virtual asset financing is strictly limited to two types: Bitcoin (BTC) and Ethereum (ETH). This limitation is mainly based on the fact that two types of assets have undergone long-term market testing, possess sufficient market depth, and relatively mature price discovery mechanisms, which can to some extent reduce the risks brought by fluctuations in collateral value. At the same time, the new regulations stipulate that the collateral deduction rate shall not be less than 60%. This prudential requirement is determined based on the market characteristics of virtual assets, historical price fluctuation data, and global similar regulatory practices, aiming to hedge the credit risks that may be caused by significant fluctuations in virtual asset prices, cut off the risk chain of "re collateralization leverage stacking", and protect the legitimate rights and interests of licensed institutions and investors.

The lifting of the ban on virtual asset financing not only expands the business boundaries of licensed institutions, but also officially incorporates virtual assets into the compliance credit system, promotes the compliance connection between virtual assets and traditional financial markets, and provides more diversified financing channels for the market.

Breakthrough 2: Compliance with perpetual contracts, focusing on professional investors to build a strong risk defense line

As the core product of the virtual asset derivatives market, perpetual contracts have long been in a regulatory ambiguity zone, with frequent industry chaos. This new regulation establishes a clear regulatory framework for perpetual contracts for the first time, achieving their compliance and implementation. At the same time, through strict investor suitability management, it prevents risks from being transmitted to ordinary investors.

The new regulations specify that perpetual contracts are only open to professional investors, and ordinary investors are temporarily not eligible to participate. This restriction is in line with the regulatory intention of "protecting small and medium-sized investors". Due to the characteristics of perpetual contracts such as no expiration date, high leverage, and two-way trading, it has extremely high requirements for investors' risk identification ability, professional investment experience, and risk tolerance. Professional investors, after strict qualification review, have stronger risk control ability and can better cope with the volatility risks brought by derivative trading. According to the Measures for the Suitability Management of Securities and Futures Investors, professional investors include financial institutions, related wealth management products, pension funds, and other institutions approved by financial regulatory authorities, as well as legal persons or natural persons whose net assets, financial assets, and investment experience meet certain standards.

In addition, the new regulations impose strict requirements on the management of margin for perpetual contracts, specifying that margin must be paid in the form of fiat currency, licensed stablecoins, or tokenized deposits, and strictly prohibiting platforms from providing any form of credit support for margin. This requirement further compresses the leverage risk space, ensures the safety and transparency of trading funds, standardizes the entire process of perpetual contract trading, and promotes the compliant and orderly development of the derivatives market.

Breakthrough 3: Allow compliant market making, activate market liquidity, and improve trading efficiency

To address the long-standing issues of insufficient liquidity and large buying and selling price differentials in the virtual asset market, the new regulations explicitly allow affiliated companies of licensed virtual asset trading platforms to serve as market makers and carry out compliant market making business. This is an important measure to improve the structure of the virtual asset market and enhance market vitality.

As the core provider of market liquidity, market makers can narrow the market ask ask spread, improve trading efficiency, and reduce investors' trading costs by continuously listing buy and sell quotes. According to regulatory rules, market making institutions need to establish strategic management, risk management, and information technology management mechanisms that run through the entire business process. They should provide reasonable quotes based on market conditions, provide real and effective liquidity, and not collude with other market makers to obtain improper benefits. At the same time, market making business should be included in the company's overall risk management system, with clear risk limits and reporting mechanisms.

This allows platform affiliated companies to serve as market makers, effectively solving the problem of "liquidity cold start" for licensed platforms while setting strict risk prevention measures and reducing conflicts of interest. It will further activate the vitality of the virtual asset market, enhance market transparency and fairness, and promote the market towards maturity and standardization.