Exchange announces first Bitcoin derivative
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[March 25, 2014]
By Douwe Miedema
WASHINGTON (Reuters) — TeraExchange
said on Monday it had constructed a swap based on the bitcoin
virtual currency, a step that would bring the emerging payment
system under the oversight of U.S. regulators for the first time.
The contract, created on behalf of two clients, was a bilateral swap
privately negotiated between them. The counterparties had not acted
on the agreement, but were expected to do so soon, the company said.
The company said it had shown the contract to the U.S. Commodity
Futures Trading Commission, which regulates swaps and futures. If
transacted by the counterparties, the contract would need to be
reported to the agency.
Regulators have stepped up their efforts to rein in bitcoin after
incidents such as the collapse of Mt. Gox, a Tokyo-based exchange
that filed for bankruptcy after losing an estimated $650 million
worth of customer bitcoins.
Bart Chilton, who stepped down from his position as a member of the
CFTC on Friday, told Reuters last week that companies had inquired
in the past month about regulations that would govern exchanges for
Ultimately, TeraExchange plans to list the bitcoin swap on its Swap
Execution Facility (SEF), a new type of regulated platform that was
set up after the credit crisis to make swaps trading more
transparent, less risky and cheaper.
The company was given a license to run a SEF last year, but no
trading has taken place on the platform yet.
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The novelty of the bitcoin currency has made it hard to categorize,
but trading derivatives such as futures or swaps would subject
companies to oversight by the CFTC.
(Reporting by Douwe Miedema; editing by Andrew Hay)
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