LedgerX Wins CFTC Approval to Launch Physical Bitcoin Derivatives

The US Commodity Futures Trading Commission (CFTC) has granted blockchain startup LedgerX its official registration as a designated contract market (DCM), helping solidify its regulatory profile and effectively allows the company to offer physically settled Bitcoin futures contracts.

Following a review of the LedgerX application, the CFTC determined that LedgerX complies with the necessary regulations under the Commodity Exchange Act (CEA).

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The crypto community reacted to the announcement with excitement, saying that the CFTC may pave the way to the much anticipated Bitcoin Exchange-Traded Fund (ETF).

LedgerX’s already has licenses to offer centralized clearing capabilities that also allow the New York-based firm to both trade and clear Bitcoin options. LedgerX said at the time it plans to launch bitcoin options for institutional investors, but it could also offers retail investor products.

As a registered DCO, LedgerX is authorized to provide its suite of clearing services with respect to swaps, subject to certain requirements; and futures and options on futures contracts traded on or subject to the rules of a designated contract market.

LedgerX plans to list and clear fully collateralized, physically settled derivatives on Bitcoin and other cryptocurrencies, the company said.

LedgerX was also granted an exemption from complying with certain CFTC regulations due to its fully-collateralized clearing model. More specifically, its Bitcoin options platform isn’t required to undertake monthly stress tests of its financial resources to ensure that it could withstand the default of its largest participant.

While a notable milestone, LedgerX also made headlines earlier last year after the CFTC issued an order of registration to the New York-based Bitcoin swap exchange, granting it registration status as a Swap Execution Facility (SEF).

LedgerX is aiming to become the first approved facility where physically-settled options on Bitcoin can be listed and cleared. Many in the crypto industry voiced their support, citing the potential benefits of hedging against market risk and the ability to gain insight into market sentiment and volatility.

LedgerX’s main rival, Bakkt, announced earlier this month that its ICE-backed platform would begin testing its much-anticipated Bitcoin futures contracts on July 22. Although still pending CFTC’s approval, the announcement was a strong indication on how the startup is confident to settle the remaining issues with the US regulators.

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