Sam Bankman-Fried, CEO of crypto derivatives substitution FTX, has argued that derivatives are vital for the efficiency of the digital asset markets.

In an interview with Forbes published on Mon, the crypto billionaire claimed that crypto derivatives are "misunderstood," asserting that critics neglect to recognize the vital function derivatives play in bolstering the liquidity and efficiency of markets.

Derivatives refer to financial contracts that derive their value from an underlying nugget or benchmark. Crypto derivatives in the class of futures, options and perpetual swaps take attracted significant popularity in contempo years.

Bankman-Fried described derivatives as "misunderstood," adding:

"People will note that derivatives merchandise more than volume in crypto than spot, which is true. But that is true of every asset course in the world."

In addition to promoting the efficiency and liquidity of derivatives, Bankman-Fried highlighted that said products tin offer greater flexibility to investors seeking exposure to crypto assets by allowing them to access the markets without taking on the challenges associated with custodying digital assets.

However, he acknowledged the risks associated with traders using excessive leverage, which tin can drive increased volatility and expose investors to liquidations. In March, Cointelegraph reported that extreme leverage had resulted in $500 1000000 worth of Bitcoin being liquidated over the course of just 1 hour.

In tardily July, Bankman-Fried lowered the leverage available to traders on his FTX commutation from 101x downward to 20x. At the time, he stated the move was intended to "encourage responsible trading." Speaking to Forbes, Bankman-Fried farther elaborated on his determination to reduce the leverage available to FTX users:

"Any position that y'all're putting on with that level of leverage tin can't be admittedly crucial for efficient markets, and this is not something I felt was particularly important or good for crypto market health."

Related: 3 things every crypto trader should know nigh derivatives exchanges

Bankman-Fried also encouraged the wider crypto industry to encompass regulation, urging digital asset firms to do "a more conscientious task of interfacing with regulators."

Earlier this month, the FTX boss estimated that it volition accept three to 5 years before there is regulatory clarity for the crypto industry. "I'm spending five hours a twenty-four hour period on everything from regulation to licensing and everything in betwixt," he said.

On Aug. 9, FTX appear that it was going to be streamlining its Know Your Customer procedures past checking phone numbers confronting data held on record to confirm users' jurisdictions.