For the first time ever, the U.S. Commodity Futures Trading Commission (CFTC) has given permission to a private company to exchange and clear any number of cryptocurrency derivatives.
After three years of work, New York-based startup LedgerX was today granted a rare derivatives clearing organization (DCO) license allowing it to clear and custody financial instruments backed by bitcoin, ether and any number of blockchain-based cryptocurrencies.
The instruments, designed to mitigate investment risk, are the latest signal that the cryptocurrency markets are maturing, with the total value of the asset class crossing $115bn earlier this year.
But the guidance from the agency in charge of ensuring the integrity of all futures and swaps markets in the US could have bigger implications than just letting a single company finally open for business.
LedgerX co-founder and CEO Paul Chou told CoinDesk:"It means a lot, not just for the industry, but globally, because the CFTC will set the example of what a well-licensed clearinghouse and exchange based around digital currencies will look like."
As part of the DCO license, LedgerX will be required to surveil the institutional investors it works with and create increased transparency about those customers for the regulatory agency. Eligible participants include broker dealers, banks, futures commission merchants, qualified commodity pools and qualified high net worth investors.
With the granting of this license, these groups will now be able to enter into complex contracts with one another, with values derived from the underlying cryptographic asset.
As a result, Chou believes the creation of these assets will mark a pivotal moment for cryptocurrency markets, giving investors more sophisticated ways to hedge, and possibly, helping to stabilize long-volatile cryptocurrency prices.
"We have a lot of in-progress talks with customers that are lo...