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Cryptocurrency derivatives exchange LedgerX has launched the first bitcoin savings account regulated by the Commodity Futures Trading Commission (SEC).
The savings product introduced by LedgerX is certified by a CFTC derivatives clearing organization (DCO) license and a swap execution facility (SEF) license. Juthica Chou, Chief Operating Officer at LedgerX said:
“Everything we do requires both the licenses. And a lot of that is intentional, because by making it a package deal we can offer a number of services to our customers in a really clear, vertically integrated way.”
“We’re seeing more and more demand for people who want to earn some sort of interest off their bitcoin and lending is not exactly natural to people – especially lending where they earn their interest back in bitcoin. So we’re seeing participants come back to trading.”
The licenses permit users to earn a yield on their Bitcoin assets. Rather than just “hodling” and hoping that Bitcoin appreciates, investors can earn a fiat-based yield on their BTC by employing what is referred to as a call overwrite technique, wherein an investor deposits BTC into LedgerX, then sells a call option at a slightly longer date, with a higher strike call option.
The project is designed to simplify BTC option trading to a basic point-and-click format, so “less sophisticated” bull traders can potentially get a premium price on their holdings. The product’s interface allows users to choose the implied rate they’re anticipating to earn and the number of BTC they wish to earn the yield on. Chou said:
“This interface will definitely be skewed to the long Bitcoin holders, who will likely only deposit bitcoin and who will want to earn interest off of that Bitcoin.”
Only eligible contract participants, as defined by the U.S. Commodity Futures Trading Commission, can trade in these call options, however. Users need to undergo “the same [know-your-customer] and application process as standard LedgerX” participants, said Chou.
“I think given the price action people are going to be more and more interested … we’re very excited, because this is something we’ve seen a lot of on the LedgerX platform.”
LedgerX was the first regulated US exchange to offer bitcoin derivatives, and it currently holds two different CFTC licenses. Trading volume is much lower than in the bitcoin futures markets on fellow US exchanges CME and CBOE — which thus far have attracted more bitcoin bears than bulls — but the firm reports that volume has increased to $30 million per month over the past quarter, with individual trades averaging $60,000 in notional value.
The bitcoin savings product is one of a number institutionally-focused services that have been timed to coincide with “Blockchain Week” in New York City.
Cryptocurrency brokerage Coinbase unveiled a slew of products aimed at institutional traders, while Japanese financial holding company Nomura partnered with cryptocurrency wallet manufacturer Ledger (no association with LedgerX) to provide institutional traders with access to secure cryptoasset custody.