The U.S. Commodity Futures Trading Commission (CFTC) has granted LedgerX, LLC (LedgerX), a license to clear and settle derivative contracts (a derivatives clearing organization – DCO) for digitial currencies.
With this license, LedgerX becomes the first regulated bitcoin options exchange.
LedgerX is now authorized to provide clearing services for fully-collateralized digital currency swaps. LedgerX, which was also granted an order of registration as a Swap Execution Facility on July 6, 2017, initially plans to clear bitcoin options.
Initially, LedgerX expects to list one- to six-month options contracts for Bitcoin. Later on, they may launch contracts for other digital currencies such as Ethereum (ETH).
Participants on the LedgerX trading platform will be able to hedge bitcoin and other digital currencies using exchange-traded and centrally cleared option contracts. The demand can increase because previously many institutions could not participate in the bitcoin market due to compliance restrictions against unregulated venues. Eligible participants in the LedgerX venue will include registered broker dealers, banks, futures commission merchants, qualified commodity pool entities and qualified high net worth investors.
The license took more than two years to win approval. LedgerX also secured $11.4 million in funding in May led by Miami International Holdings Inc and China’s Huiyin Blockchain Venture Investments.
There are other platforms that offer options trading – Bitcoin Mercantile Exchange, owned by Seychelles-incorporated HDR Global Trading Ltd., and Deribit of Amsterdam, but these are not regulated.