According to CoinDesk, LedgerX has launched the first physically-settled Bitcoin futures contracts in the US. The news comes at a time when Intercontinental Exchange’s Bakkt and TD Ameritrade’s ErisX have struggled to launch amid regulation issues.
LedgerX Launches Bitcoin Futures Contracts
LedgerX is now the first Bitcoin futures provider in the US that offers physical futures. This means that the customer receives Bitcoin when the contract expires as opposed to fiat dollar as per the more traditional futures contracts out there.
The Chicago-based exchanges CME and Cboe have offered “cash-settled futures contracts” since 2017. These return the cash equivalent of the contract’s value to the customer when it expires. However, with a physically-settled contract, traders receive the underlying commodity, which in this case is Bitcoin.
LedgerX will be the first to offer “physical-settled futures contracts,” and the platform allows traders to buy contracts using Bitcoin—avoiding the need to use fiat at all.
According to CEO Paul Chou:
“Not only are they delivered physically in the sense that our customers can get bitcoin after the futures expires, but also they can deposit bitcoin to trade in the first place. Cash-settled is cash-in and cash-out, we’re bitcoin-in and bitcoin-out.”
Retail and Institutional
LedgerX’s contracts are available to both institutional and retail investors. This means anyone who passes the know-your-customer (KYC) processes can trade the contracts; the platform is not exclusive to multi-million-dollar institutional clients.
Importantly, Chou believes that this is the first time a “regulated company is able to allow customers to deposit bitcoin as collateral for a contract.”
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The entire process is important for Bitcoin because it is much faster and doesn’t require any interference from banks:
“If you imagine somebody that deposits bitcoin, they would not have to use the U.S. banking system at all. That’s why physically-settled is very important […] I think [it’s] one of the most unique use cases for bitcoin, where you’re using cryptocurrencies as the only collateral.”
Without the need for the banking system, customers won’t wait on bank transfers or on other associated limitations.
While the teams at Bakkt and ErisX may be writhing in jealousy, the LedgerX’s launch should only help speed up regulatory approval.
At least we know that Bakkt is close; it began testing its Bitcoin futures contracts a little over one week ago.
What are your thoughts on this?
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