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:

REUTERS SHOWCASE

Lakhvi's Bail

Lakhvi's Bail

Pakistan court bails man accused of masterminding Mumbai attack.  Full Article 

PM's Moves

PM's Moves

Modi moves in to speed up $300 billion stuck projects.  Full Article 

Coal Unions

Coal Unions

Coal India workers threaten five-day strike, stokes output worries.  Full Article 

Space Programme

Space Programme

ISRO tests its heaviest space launch vehicle, eyes global market.  Full Article 

Peshawar attack

Peshawar Attack

Some Pakistan militants denounce school attack, amid national outrage.  Full Article 

Uber Again

Uber Again

Uber driver in Boston charged with kidnapping and rape.  Full Article 

Discounts

Discounts

Dealers offer gold discount for first time in five months.  Full Article 

"PK" in Cinemas

"PK" in Cinemas

Secret of year's "biggest" Bollywood film is its plot.  Full Article 

Reuters India Mobile

Reuters India Mobile

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