Tera Exchange announces first Bitcoin derivative

WASHINGTON Mon Mar 24, 2014 11:44pm IST

A mock Bitcoin is displayed on a table in an illustration picture taken in Berlin January 7, 2014. REUTERS/Pawel Kopczynski/Files

A mock Bitcoin is displayed on a table in an illustration picture taken in Berlin January 7, 2014.

Credit: Reuters/Pawel Kopczynski/Files

Related Topics

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 bitcoin derivatives.

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.

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)

FILED UNDER:

"India's Daughter"

Reuters Showcase

Countering China

Countering China

PM Modi to ramp up help for Indian Ocean nations to counter China influence  Full Article 

'India's Daughter'

'India's Daughter'

Society created Delhi gang rape convicts: Filmmaker Leslee Udwin.  Full Article | Related Story 

Kohli Censured

Kohli Censured

BCCI warns Virat Kohli against repeat of misbehaviour.  Full Article 

MUDRA Bank

MUDRA Bank

Funding the unfunded: India helps small business borrow to grow  Full Article 

PML(N)'s Hope

PML(N)'s Hope

Pakistan's ruling party looks for gains in upper house election  Full Article 

For Women's Right

For Women's Right

Afghan men don burqas, take to the streets for women's rights.  Full Article 

U.S. Envoy Attacked

U.S. Envoy Attacked

Knife-wielding attacker slashes face of U.S. ambassador in South Korea  Full Article 

New Strategy

New Strategy

Ashwin mulls 'one-sided' ploy against big-hitters.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage