The U.S. Commodity Futures Trading Commission (CFTC) has announced that has issued an order granting LedgerX, LLC registration as a derivatives clearing organization under the Commodity Exchange Act (CEA).
Under the order, LedgerX will be 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.
The terms and conditions of the order require, among other things, that LedgerX comply with applicable provisions of the CEA, including the core principles set forth in Section 5b of the CEA, and with Commission regulations. LedgerX also must fulfill each of the representations it has made to the Commission relating to compliance with the core principles and Commission regulations.
In response to a request from LedgerX, the Commission’s Division of Clearing and Risk also today issued a letter exempting LedgerX from complying with certain Commission regulations due to LedgerX’s fully-collateralized clearing model.
This authorization to provide clearing services for fully-collateralized digital currency swaps does not constitute or imply a Commission endorsement of the use of digital currency generally, or bitcoin specifically.
LedgerX plans to launch bitcoin options in early fall, and ethereum options within a few months. That will mark the first federally supervised options venue for bitcoin.
A U.S. federally-regulated venue for derivative contracts settling in digital currencies opens the market to a much larger customer base,” Paul L. Chou, LedgerX CEO commented.
We are seeing strong demand from institutions that previously could not participate in the bitcoin market due to compliance restrictions against unregulated venues,” Chou said, noting a desire for assets that aren’t correlated with the broader stock market.
We’re “really excited to welcome a whole host of parties that traditionally have been very retail-oriented,” Chou added, noting he expects “very large asset managers to enter the space” as a result of the CFTC’s approval.
The firm primarily operates in New York and said in May it raised $11.4 million in a Series B round of financing led by Miami International Holdings and Huiyin Blockchain Venture Investments.