BitPay, Circle Among Staunch Supporters of CFTC Approval for LedgerX Clearing Bitcoin Derivatives

The comment period offered by the US Commodity Futures Trading Commission (CFTC) on LedgerX’s application for registration as a Derivatives

The comment period offered by the US Commodity Futures Trading Commission (CFTC) on LedgerX’s application for registration as a Derivatives Clearing Organization and Swap Execution Facility has been extended until February 20.

LedgerX wants to become the first approved facility where physically-settled options on bitcoin can be listed and cleared. Last October, the startup received funding from Lightspeed Venture Partners, Google Ventures and others.

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Among notable commenters were BitPay and Circle. Both businesses engage in the exchange of bitcoin for fiat on behalf of their clients, requiring them to maintain a sufficient reserve of bitcoin. Thus, derivative products will help hedge exposure to price volatility, and the approval of a registered facility will instill confidence in its users.

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Tony Gallippi of BitPay added that it’s important for the US to take a leading role in the trading of bitcoin and bitcoin derivatives, as it did in the 1990’s for internet access and availability.

Circle Head of Treasury and Trading Operations Joshua Lim expanded upon the advantages of such derivatives: (1) to hedge against market risk and stay within defined risk limits, (2) to decouple the need for deliverable bitcoin inventory from a net delta position, (3) options can help cater to higher customer demand for bitcoins at low prices and (4) to gain insight into market sentiment and implied volatility.

Also weighing in was Lightspeed Venture Partners. Echoing the aforementioned commentary, partner Jeremy Liew added that derivatives exchanges “generally increase liquidity and improve price discovery in the underlying instrument.”

A total of 14 comments have been received.

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