There are a lot of concerns about bitcoin as two exchanges prepare to trade futures on the unregulated cryptocurrency starting Sunday.
However, former market regulator Bart Chilton believes trading bitcoin futures will be safe and could actually help stabilize the cryptocurrency, he told CNBC on Thursday.
Chicago-based Cboe Global Markets is set to launch bitcoin futures on Sunday, and CME, the world's largest futures exchange, is planning to launch its futures product next week. Both exchanges are regulated by the Commodity Futures Trading Commission, which Chilton used to head.
"They know what they are doing in these markets. CME is the most liquid, diverse traded futures contracts around the world," Chilton said in an interview with CNBC's "Power Lunch."
"The quicker that we can get to some transparency, the quicker we can know who is in these markets â is it institutional investors, is it individuals â then the underlying [bitcoin] will also have a little bit more stability in it than we see now," he added.
Bitcoin has been on a wild ride over the past few days, soaring above $19,000 for the first time on Thursday before falling sharply. At 3:13 p.m. ET, it traded at $15,981.14 on the Coinbase exchange.
The volatility has led to some concern over the cryptocurrency and bitcoin futures.
The Futures Industry Association, a global organization representing 64 clearing members, sent a letter to the CFTC on Wednesday laying out concerns about that volatility as well as the risks clearing firms will have to absorb if there is a default.
Chilton said the CME and Cboe know what the risks are and are very adept at setting their margins, which are constantly adjusted in things that are more volatile.
The CFTC has said that government regulation aims to preserve the integrity of the contracts.
The exchanges are looking at the underlying cash contract to make sure it's not manipulated," Andrew Busch, chief market intelligence officer at the Commodity Futures Trading Commission, told CNBC. "Our role as a derivatives regulator is to make sure that the futures contract is not manipulated. We're going to do that for sure."
Chilton has long been a proponent of regulating the digital currency, which has no central authority. Its transactions are recorded in an anonymous public log called the blockchain.
"It doesn't have to be a full-throated regulation that thwarts innovation. I support digital currencies. But there needs to be some consumer protections," he said.
Notable critics such as JPMorgan Chase CEO Jamie Dimon have called bitcoin a "fraud."
â CNBC's Matthew Belvedere and Patti Domm contributed to this report.
Bitcoin Price Move Past $6.5K Would Boost Upside Potential
Against expectations, bitcoin (BTC) defended support at $6,000 over the weekend, opening the doors for a stronger corrective rally above $6,480.
Friday's drop below $6,240 (bear flag breakdown) had
XRP Cryptocurrency Now Down 90% From 2018 Price High
XRP, the world's third-largest cryptocurrency by market capitalization, fell to its lowest price of 2018 on Tuesday.
At 00:01 UTC, just after Monday's close, the cryptocurrency dropped to $0.27 cen
Bitcoin's Price Falls Below $6K to Near 2018 Low
The price of bitcoin fell below $6,000 on Tuesday, a move that brought the world's largest cryptocurrency within 2 percent of its 2018 low.
At press time, bitcoin is trading hands at $5,922, print
Korea's Jeju Island Seeks to Become ICO Hub Despite Domestic Ban
South Korea's Jeju island is seeking to become a free zone for initial coin offerings (ICOs) – a plan that, if approved, would allow crypto projects to conduct token sales in the self-governing provin
Square Expands Cash App Bitcoin Service to All 50 US States
Mobile payments firm Square now lets customers buy and sell bitcoins via its Cash App in all 50 U.S. states.
The company – which was co-founded by Twitter chief executive Jack Dorsey – announced th
Jamaica Stock Exchange to Trade Crypto Assets in 2018
The Jamaica Stock Exchange (JSE) will soon be offering cryptocurrencies as tradeable assets for clients.
The company said Tuesday that it had signed a memorandum of understanding (MoU) with blockch
Fantasy Football League to Raise $100 Million in Crypto ICO
A blockchain startup wants to raise nearly $100 million dollars to create a new form of fantasy football.
Called the Crown League, the project's owner told CoinDesk on Tuesday that it seeks to form
Goldman Sachs, JPMorgan Invest in Axoni's $32 Million Funding Round
Enterprise-focused blockchain startup Axoni has completed a $32 million Series B funding round led by Goldman Sachs and Nyca Partners.
Also participating in the round were Andreessen Horowitz, Citi