The management at LedgerX, a newly developed cryptocurrency-based derivatives trading platform, is planning to launch physically settled Bitcoin (BTC) futures contracts.
If LedgerX successfully manages to introduce such a product, which was also proposed last year by Bakkt, then it could become the first US-based company to allow investors to purchase physically settled BTC contracts.
Awaiting Regulatory Approval
On April 15th, LedgerX’s management revealed it had filed for a designated contract market (DCM) license, which (if approved) will allow the firm to issue physically-settled BTC futures products to its clients. These are different from cash-settled Bitcoin futures contracts which are issued by the CME Group (and previously also by Cboe).
Instead of receiving a payout in fiat currency, such as USD or EUR, those who acquire LedgerX’s physically-settled Bitcoin contracts would receive actual Bitcoin, the underlying cryptocurrency, as a return on their investment.
Commenting on the initiative, Juthica Chou, the Chief Risk and Operating Officer at LedgerX, remarked:
We’ll be able to service customers of any size, we won’t be restricted to [institutional investors].
Assuming LedgerX’s application is approved, then the company will be able to offer Bitcoin, Bitcoin futures, and Bitcoin options to retail clients through a platform called Omni. Developed on LedgerX’s proprietary infrastructure, the Omni platform will allow the firm to serve as a custodian and a crypto trading solutions provider.
LedgerX's Existing Platform Launched In July 2017
LedgerX’s current platform and its associated services, which mainly include trading cryptocurrency derivatives, received regulatory approval in July 2017.
A few months after obtaining regulatory clearance, the firm introduced its digital asset-based derivatives products. After having endured the extended bear market of 2018, Chou’s firm is now set to launch a new platform that will aim to utilize LedgerX’s current liquidity pool in order to “offer retail customers a top tier experience from day one.”
Explaining that LedgerX had “always been” planning to develop a platform specifically for retail investors, Chou noted that the company first began providing physically-settled crypto derivatives products in October of 2017. Notably, LedgerX facilitated the trade of around $1 million in derivatives only 1 week after the launch of its products (in 2017).
According to Chou: “Once the platform had [proven to be] stable and we got an operational cadence, we filed for a license” with the Commodity Futures Trading Commission (CFTC). She added:
For us, this is a philosophically important move because bitcoin is available to everyone and we … really wanted to make our derivatives products available to all investors as well.