Key Takeaways:
China is designing a futures market for AI tokens, sources familiar with the matter said, as the country takes a different tack from US exchanges developing compute power futures to tap the rapidly growing appetite to hedge AI costs.
"Tokens function as the digital fuel or raw material that powers AI models," Xiao Feng, Chairman and CEO of HashKey Group, said.
The Shanghai Futures Exchange is in the early stages of designing futures contracts for AI tokens — the smallest unit of information processed by AI models — according to one person familiar with the matter. The exchange's research is preliminary and driven partly by the AI rivalry with the US, the person said. The CME Group and Intercontinental Exchange in the US are preparing to launch GPU compute futures tied to the cost of renting computing power, while Shanghai's product would be tied to AI tokens used for pricing AI services.
BlackRock Chief Executive Larry Fink told a conference earlier this month that surging demand for tokens could spawn an entirely new asset class in buying futures of compute, as computing power shortages have forced many Chinese AI models to ration user access in recent months.
A New Asset Class Takes Shape
China's daily token usage has rocketed 1,000-fold since the start of 2024 to more than 140 trillion by the end of March, according to official data. The explosive growth reflects the country's accelerating AI development, which Beijing has designated a strategic sector and engine of growth.
China is accelerating the development of a spot market for computing power, backed by data-center operators and AI model providers who use compute power. In December, the country's official commodity index company published a series of indices tracking compute supply — which could serve as underlying benchmarks for futures contracts.
US-China Competition Heats Up
Yilei Shao, dean of the Shanghai AI-Finance School at East China Normal University, said China should launch token futures sooner rather than later, as the derivative is key to the technological contest centered on AI and semiconductors.
"The United States and China are the only two nations capable of mass-producing artificial intelligence," she said. "Whoever masters AI, rules the world."
Zhang Yunquan, a computing technology researcher at the Chinese Academy of Sciences, in March proposed the launch of compute futures to China's parliament, according to official media. Brokerage Baocheng Futures said in a research note earlier this month that China is expected to debut compute futures in three to five years, though it noted the current fragmented market was an obstacle.
It is too early to tell when token futures will be launched and the plan is subject to changes, a second person familiar with the matter said. It is also not clear when the exchange would seek regulatory approval. The Shanghai Futures Exchange and the China Securities Regulatory Commission did not respond to requests for comment.
All of these derivative products are designed for companies along the AI supply chain to hedge against the cost of computing power, as the US and China compete for dominance in the technology.
This article is for informational purposes only and does not constitute investment advice.
