LedgerX: Media Misreports BTC Futures Status, Option 'Coming Soon'

Earlier this week, United States-regulated crypto derivatives and clearing platform LedgerX was reported to launch the first physically settled Bitcoin futures contracts in the country, therefore stealing a march on Bakkt and ErisX. However, the Commodities Futures Trading Commission soon refuted that information by stating that the exchange has not yet been properly cleared by the agency.

"LedgerX has requested that the CFTC amend its order of registration as a DCO, which limits LedgerX to clearing swaps, to allow it to clear futures listed on its DCM.".

As CoinDesk reported in a separate article, LedgerX decided to launch BTC futures regardless, since the deadline for its amendment had allegedly passed.

Another cryptocurrency news outlet, The Block, also quoted a CFTC spokesperson saying that LedgerX does not have the necessary DCO license to trade futures, as it currently only permits the clearing of swaps, not futures.

Additional reaction: LedgerX's PR firm drops its client, CEO says the company is considering suing CFTC. After it became clear LedgerX has not launched BTC futures, Ryan Gorman, founder of communications agency RGPR, which the clearing platform was apparently a client of, tweeted that his firm has terminated its relationship with LedgerX "Due to concerns over the events of the past 24 hours." RGPR has not responded to Cointelegraph's request to offer an additional statement.

What the fuss is all about? The importance of physical BTC futures.

Essentially, futures act as an agreement to buy or sell an asset on a specific future date at a specific price - and hence represent a risk management tool that might be particularly useful in volatile markets such as crypto.

The distinctive feature of physically settled BTC futures, in turn, is that once the contracts expire, customers receive BTC tokens as opposed to cash.

"If your objective is to lock in the price toward a future purchase of the actual asset, physically-settled BTC futures is the better option," Martin Weiss and Juan Villaverde of Weiss Ratings explained to Cointelegraph in an email.

"First, even after settlement, you'd need to go to another exchange to purchase the BTC. Second, in the interim, the BTC price you pay could be significantly higher. And most important, if you're a large institutional player investing large amounts, you might not easily secure the desired quantity of BTC. In effect, all this defeats the purpose of buying a futures contract to begin with. Thus, cash-settled contracts are useful mostly for speculators who have no intention of owning the actual asset."