New York-based LedgerX has been licensed to sell cryptocurrency derivatives, by the US Commodity Futures Trading Commission. Paul Chou, CEO of LedgerX, made the announcement in a post on the company’s blog.Derivatives Based On Any Crypto
LedgerX is now the first company in the United States to be licensed to sell derivative instruments with any type of cryptocurrency as the underlying asset. Derivative instruments frequently take the form of put or call options, but can also take the form of other conditional trade agreements, potentially very complex ones.
Creating a derivative market for cryptocurrency could potentially bring more stability to prices in the crypto space. The ability to hedge bets on crypto could also bring more institutional investors to the still-relatively-new asset class, along with plenty of institutional investment capital.“Crucially, we believe derivatives on cryptocurrencies will be needed in the long term for people and institutions to manage the volatility around these conversions.”
The first product LedgerX plans to offer is a simple day-ahead swap between bitcoin and dollars. The day-ahead swap allows customers to trade bitcoin for dollars (or dollars for bitcoin) today, at today's prices, then receive delivery the next day. More complex derivative contracts will be added in the future.Fully Licensed NY Futures Exchange
Holding the first license of its kind, LedgerX hopes to serve as a model to the rest of the world. Naturally they mean that in the sense of being a good corporate actor, but LedgerX also hopes to serve as a regulatory model for other companies in the US and around the world.
The pursuit of federal approval and licensing was a conscious decision that the company has been pursuing for three years:"We are not a money services business. We are a United States exchange and clearing house, which allows us to have a single federal regulator… The earlie...