Defi as a more open, transparent, and efficient financial system
Hyperliquid Labs’ responses to the CFTC’s requests for comment on perpetuals and 24/7 trading
The following is a guest post by Hyperliquid Labs.
Why we submitted comment letters
Hyperliquid Labs is committed to the advancement of defi and its promise in delivering a more open, transparent, and efficient financial system for all. As a contributor to the Hyperliquid blockchain, we believe in defi’s ability not only to meet but to exceed the demands of modern financial markets.
In this spirit, Hyperliquid Labs submitted two comment letters to the United States’ Commodity Futures Trading Commission (CFTC) in response to its recent Requests for Comment (RFCs) on perpetual derivatives and 24/7 trading. We commend the CFTC for its proactive engagement on these topics, understanding of which is fundamental to the evolution of global markets.
We believe that Hyperliquid exemplifies how core defi principles can be put into practice to enhance market efficiency, market integrity, and user protection. Hyperliquid is a valuable example for how these advanced market structures can thrive.
What is Hyperliquid?
Hyperliquid is a general-purpose blockchain designed to bring all financial activity onchain. Hyperliquid features permissionless user programmability through the HyperEVM. Hyperliquid also features natively implemented financial primitives as infrastructure, with which user-built applications can interact. One such example is native order books, and in particular, order books for perpetual derivatives.
Perpetual derivatives are a major innovation of cryptocurrency markets: a refined delta-one derivative that trades 24/7 without settlement, offering superior liquidity, price discovery, and user experience. They have demonstrated significant adoption in global cryptocurrency markets over the past decade as the primary liquidity hub for most major cryptocurrency assets. Perpetual derivatives are built as native infrastructure in the Hyperliquid blockchain and are just one component of a larger ecosystem.
Key points from our response on 24/7 trading
The RFC for 24/7 trading invited comment on crucial aspects of market operation: liquidity, collateral management, operational resilience, and regulatory surveillance. Hyperliquid, which operates 24/7, demonstrates that defi is exceptionally well-suited to address these considerations.
Continuous liquidity and robust margining
- Pre-funded collateral: Traders pre-fund their positions onchain, eliminating reliance on bank wires or the risk of daylight overdrafts for intermediaries.
- Automated liquidations: Positions are automatically liquidated if margin requirements are not met. Safeguards like partial liquidations mitigate cascade risks, and margin levels are reassessed continuously with every trade and oracle price update.
- Continuous trading: Crypto markets never close, so prices and collateral update continuously, removing the “weekend gap-risk” seen in traditional markets.
Inherent operational resilience and enhanced surveillance
- Distributed infrastructure: Permissionless validator nodes run by independent teams across diverse hosting environments ensure trading continues even if some nodes experience outages.
- Autonomous operation: Code is designed to run autonomously, without the need for manual intervention or 24/7 staffing.
- Immutable audit trail: Every order, fill, margin change, and liquidation is publicly verifiable in real-time and immutably recorded in the blockchain history. Anyone can run their own node to provably execute and inspect markets in real-time, shifting from batch reporting to continuous, tamper-proof oversight.
Key points from our response on perpetual derivatives
The RFC on perpetual derivatives invited comment on the use cases, challenges, and opportunities of perpetual derivatives. Hyperliquid demonstrates that the unique structure of perpetual derivatives offers significant advantages, especially when implemented onchain, notably:
- Transparency & verifiability: All actions are publicly auditable on the blockchain, with sub-second finality. Anyone can run a node to verify activity.
- Composability & innovation: Developers can build innovative applications using smart contracts that interact with onchain perpetuals and other native financial infrastructure.
- Self-custody: Users maintain control of their assets using their own wallets, mitigating counterparty risks associated with centralized intermediaries.
We advocate for a principles-based regulatory approach for perpetuals, focusing on risk profiles, transparency, and consumer protection rather than fixed classifications, which could hamper innovation.
A collaborative vision for defi in the U.S.
Defi platforms like Hyperliquid are not just theoretical constructs. They are operational, battle-tested systems demonstrating enhanced efficiency, transparency, and resilience. We look forward to continued engagement with regulatory bodies like the CFTC. Supporting defi in the U.S. with open dialogue and a clear regulatory framework is an opportunity to ensure the U.S. remains a leader in financial innovation while robustly protecting users.
Hyperliquid Labs, alongside the broader Hyperliquid community, is committed to being a constructive partner in this journey. We thank the CFTC for its leadership in exploring these critical market innovations and for the opportunity to contribute our perspective.
