LedgerX has applied for registration with the Commodity Futures Trading Commission (CFTC) as a swap execution facility and a derivatives clearing organization according to its website. LedgerX intends to initially list physically-settled digital currency (e.g., bitcoin) option contracts.
If approved, LedgerX will become the first federally regulated bitcoin derivatives clearinghouse for institutional participants, according to a recent press release. A spokesperson for LedgerX points out that the CFTC has only approved 14 active clearinghouse licenses. “Clearing for digital currencies is a pioneering move,” says the spokesperson, who adds that regulation of digital currencies, which had been in dispute, was clarified this fall and now falls under the purview of the CFTC as well as individual states. This December the CFTC announced it was accepting comments on the LedgerX SEF and clearing application. That comment period ends on Jan. 30:
- CFTC Announces LedgerX Request for comment http://www.cftc.gov/PressRoom/PressReleases/pr7078-14)
- Comments can be viewed here: http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1546
According to the release, LedgerX is planning to bring together corporations seeking to hedge their bitcoin exposures together with financial institutions searching for trading and investment opportunities as more than 80,000 entities are now accept bitcoin, including Dell, Expedia and PayPal.
“Digital currency derivatives present a huge opportunity, but to gain mainstream adoption, a regulated market will need to be developed,” said former CFTC Chairman and Nymex CEO James E. Newsome, one of the two independent directors on LedgerX’s board. Newsome added in the release, “By providing liquidity and a secure venue for investors to manage short and long-term risk, LedgerX will facilitate the evolution and adoption of bitcoin.”