On July 24, 2017, the CFTC approved registration of LedgerX, LLC as a derivatives clearing organization (DCO), or registered derivatives clearinghouse, under the Commodity Exchange Act (CEA). LedgerX is the first digital currency trading platform approved in the US to clear derivatives contracts that can potentially be settled in bitcoin. The CFTC also issued Staff Letter No. 17-35, which provides relief to LedgerX from certain CFTC DCO regulations.

The CFTC's approval of LedgerX's DCO registration follows the CFTCs July 6, 2017 approval of LedgerX's application to become the first swap execution facility (SEF) to list bitcoin options.

The LedgerX registration order permits LedgerX to clear fully collateralized digital currency swaps, meaning that LedgerX must retain sufficient funds to cover the maximum possible counterparty loss in the event of liquidation or expiration of a cleared contract for which there is a required payment. LedgerX is also expected to comply with all applicable provisions of the CEA, including core DCO principles found in CEA Section 5b. For details on final CFTC DCO rules, see Legal Update, CFTC Issued Final Rules for Derivatives Clearing Organizations Under Dodd-Frank.

Staff Letter No. 17-35 was issued in response to LedgerX's request for exemptive relief from certain applicable regulations due to the nature of LedgerX's clearing model which will:

Participants will be allowed to self-clear or clear through a futures commission merchant (FCM) and it is anticipated that most participants will self-clear. LedgerX will initially clear only swaps entered into in its own SEF, and has represented to the CFTC that all participants will be eligible contract participants (ECP).

Staff Letter No. 17-35 provides temporary relief to LedgerX from certain provisions of CFTC Regulations Part 39, which includes stress testing, reporting, product and participant eligibility requirements, risk management, and public information disclosures.