LedgerX Approved by CFTC to Offer Non-Crypto Derivative Products


The US Commodity Futures Trading Commission (CFTC) has amended its official registration for blockchain startup LedgerX, helping solidify its regulatory profile and effectively allows the company to clear products not directly connected to cryptocurrencies.

The company has been working with the securities regulator to secure its amendment since 2018.

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“Under the amended order, LedgerX is authorized to provide clearing services for fully-collateralized futures and options on futures in addition to the previously authorized swaps, and will no longer be limited to clearing digital currency products,” the CFTC said.

The blockchain firm offers bitcoin derivatives products to both institutional and retail investors, primarily physically-settled options and swaps contracts. LedgerX made headlines a year ago when it announced the botched launch of physically-settled bitcoin futures, but a day after the original announcement the firm hit a snag with the CFTC.

In a surprising turn of events, the regulator denied that granting LedgerX its official registration as a designated contract market (DCM) does not effectively allow the company to offer physically-settled Bitcoin futures contracts. At the time, it added that LedgerX’s application to modify registration allowing it to do so remains outstanding, and thus, the firm never secured the proper licensing to offer futures to retail clientele.

Clashes with Regulators

The company won the so-called designated contract market license which should clear the way for physically delivered bitcoin futures and was also granted an exemption from complying with certain CFTC regulations due to its fully-collateralized clearing model.

This should have cleared the way to become the first approved facility where physically-settled instruments on Bitcoin can be listed and cleared. More specifically, its Bitcoin options platform is not required to undertake monthly stress tests of its financial resources to ensure that it could withstand the default of its largest participant.

A few months later, the board of directors of LedgerX parent company announced that co-founders, Paul and Juthica Chou have been placed on administrative leave.

As a registered DCO, LedgerX is authorized to provide its suite of clearing services with respect to swaps, subject to certain requirements; and futures and options on futures contracts traded on a designated contract market. The New York-based firm said at the time it plans to launch bitcoin derivatives for institutional investors, but it could also offer retail investor products.

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