The US Commodity Futures Trading Commission (CFTC) has approved institutional bitcoin derivatives trading and clearing platform LedgerX as the first federally-regulated bitcoin options exchange and clearinghouse.
An independent agency of the US government, the CFTC has acted as regulator for the futures and options markets since 1974.
Following the CFTC authorisation, LedgerX will introduce regulated bitcoin options trading this autumn, with ethereum options to follow within months, enabling digital currency investors and miners to hedge the volatile assets under US regulatory oversight for the first time.
“A US federally-regulated venue for derivative contracts settling in digital currencies opens the market to a much larger customer base,” said LedgerX’s chief executive Paul Chou, a former trader for Goldman Sachs. “We are seeing strong demand from institutions that previously could not participate in the bitcoin market due to compliance restrictions against unregulated venues.
“It’s an important milestone for the digital currency market broadly. This will pave the way for others globally to look at the space and the appropriate way to regulate a new market like this.”
Founded in 2013, New-York based LedgerX aims to provide institutional investors with the ability to hedge against price swings in digital currencies in the same way they protect against volatility in other assets.
The platform won approval from the CFTC earlier this month for Swap Execution Facilities (SEF) authorising it to trade digital currencies, to which this was added the status of a Derivatives Clearing Organisation (DCO). Chou, who has also been a member of the CFTC’s technology advisory committee said that a long education process meant that it had taken more than two years for the company to be awarded the two statuses.
LedgerX now plans to begin offering one to six-month bitcoin-to-dollars options contracts from late September or early October. Chou expects the ability to hedge digital assets to attract institutional investors who were previously on the sidelines.
“We’re getting people that want to hedge and people that want exposure to a new asset class that they can add to their portfolio and help diversify, and get potential upside of potential digital currency,” he said. “We want to keep it to a certain size in the beginning before we scale up over the next couple of months.”
While bitcoin’s value has fluctuated sharply in recent years, with US$100 price drops in a day not uncommon, it has performed strongly over the past year and regularly recorded record highs – most recently reaching the US$2,500 level.
Rising interest rates, excitement around blockchain use cases and cross-border payments were all hot topics at this year's AFP conference in San Deigo.
On-Demand Treasury Management Solutions continue to gain increased adoption in the US and EMEA regions.
Despite the data protection regulation being implemented in 2018, 69% of IT decision makers don’t have the backing of their board to achieve GDPR compliance, according to Calligo.
The US dollar and debt yields falling on the North Korea missile test, treasury being a top target for cyber criminals and why treasurers aren't into real-time payments all hit the latest headlines in the world of treasury this week. Don't miss our ten top news stories from around the world.