Cryptocurrency liquidity provider B2C2 has launched a gold-backed derivative product that will be settled in Bitcoin.
Reported by The Block today, the product was introduced amid the increasing demand from the customer base for the London-based company.
Only institutional clients will be allowed to trade the derivative at the Financial Conduct Authority (FCA)-regulated OTC desk of the company.
Explaining the newly launched product, Max Boonen, founder and CEO of B2C2, told the crypto-focused publication: “Clients trade an ounce of gold priced in bitcoin, and the derivative is settled in Bitcoin.”
“The benefit of trading gold in a derivative form [synthetically] is that it’s simpler to trade than the cash underlier for a variety of operational reasons, and typically represents the majority of activity in the product/asset.”
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The minimum tradable size of a unit is kept at one ounce of gold, which is currently priced around $1,500 in the market.
A combination of bullion and crypto
Gold is believed to be one of the safest forms of investment due to its intrinsic value. The price of the commodity spiked significantly over the last 12 months due to escalating US-China trade war and several other macro-economic factors. Since last October, gold prices surged 26 percent on the global markets, according to MonayMetals.com.
“The clients we are seeing demand from are those who have their own user base of traders and macro hedge funds,” Boonen added.
The London-based company received a license from the British financial markets regulator in January to deal with contracts for difference (CFDs).
Meanwhile, in Singapore, the liquidity provider won a lawsuit against crypto exchange Quoine over a dispute of $12 million worth trade settlements.
Similar to B2C2, many other companies are experimenting on the combination of bullion and crypto. Last month, Paxos, a New York-based blockchain company, launched a digital currency backed by and redeemable for physical gold.