NEW YORK (Reuters) – The U.S. Commodity Futures Commission said on Monday there is granted New York-based LedgerX, a bitcoin options exchange, the 1st license to clear and settle derivative contracts for digital currencies.
The license authorizes LedgerX to deliver clearing services for fully collateralized digital currency swaps. LedgerX, that is also granted permission to operate as a swap execution facility early this month, initially promises to clear bitcoin options, the CFTC said within a statement.
The CFTC, however, also clarified included in the statement the fact that approval of LedgerX’s license “does not constitute or imply a commission endorsement with the usage of digital currency generally, or bitcoin specifically.”
With the settlement and clearing license, participants during the LedgerX trading platform can hedge bitcoin (GDAXUSD) and other digital currencies using exchange-traded and centrally cleared option contracts. Initially, LedgerX expects to list out one- to six-month options contracts for bitcoin. Other digital currency contracts just like ethereum (ETH) options are expected to follow.
Ethereum can be another online public ledger just like bitcoin, though with self-executing transactions.
“Having a regulated clearing house will open industry to several other investors for example the large institutions,” said Paul Chou, founder of LedgerX, in a interview.
“A proper regulatory framework will open this market and make them comfortable.”
The license took more than eighteen months to win approval partly due to a long education process, said Chou, who also sits about the CFTC’s Technology Advisory Committee.
To get the clearing license, LedgerX secured $11.4 million in funding in May led by Miami International Holdings Inc and China’s Huiyin Blockchain Venture Investments.
“We are seeing strong demand from institutions that previously can’t have fun playing the bitcoin market as a result of compliance restrictions against unregulated venues,” said Chou.
He said fund managers desire to hold financial instruments that aren’t correlated while using broader equity market, and digital currencies meet that.
Founded in 2019, LedgerX first received a short lived approval to work in return execution facility in 2019.