In what amounts to a very significant step forward for the financial mainstreaming of crypto currencies, the U.S. Commodity Futures Trading Commission has approved Ledger X, LLC to operate the first regulated bitcoin options exchange. As noted by Bloomberg, the New York-based company plans to offer one to six month bitcoin-to-dollars options contracts in late September to early October, LedgerX Chief Executive Officer Paul Chou said in a telephone interview. Contracts for other digital currencies including for Ethereum’s ether are expected to follow.
“We want to keep it to a certain size in the beginning before we scale up over the next couple of months,” Chou said. “We’re getting people that want to hedge and people that want exposure to a new asset class that they can add to their portfolio and help diversify, and get potential upside of potential digital currency.”
The license took more than two years to win approval partly because of a long education process, said Chou, who also sits on the CFTC’s Technology Advisory Committee.
To get the clearing license, LedgerX secured $11.4 million in funding in May led by Miami International Holdings Inc and China’s Huiyin Blockchain Venture Investments.
“We are seeing strong demand from institutions that previously could not participate in the bitcoin market due to compliance restrictions against unregulated venues,” said Chou.
He said fund managers want to hold financial instruments that are not correlated with the broader equity market, and digital currencies meet that need.
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.