LCH, the clearinghouse arm of the London Stock Exchange Group, has announced that it will offer clearing services for cash-settled Bitcoin (BTC) index futures and options. The separate service, LCH DigitalAssetClear, which is part of the company’s French arm, will finalize trades made on GFO-X, a UK-regulated digital asset exchange. The move is a response to the increasing interest among institutional market participants, who are looking for access within a regulated environment they are familiar with, according to Frank Soussan, Head of LCH DigitalAssetClear.
Clearinghouses offer a centralized venue in which to finalize trades that are agreed on an exchange. Since the 2008 financial crisis, they have been favored by regulators as a way to lessen the risk of separate bilateral deals among players such as investment banks. As Bitcoin index futures and options are a rapidly growing asset class, LCH’s move represents the latest foray by traditional finance players into the crypto market.
The news comes as the crypto market continues to grow, with institutional investors increasingly looking to enter the space. Earlier this year, Fidelity Investments announced that it would launch a cryptocurrency trading and custody platform for institutional investors. In addition, the Intercontinental Exchange (ICE) is set to launch a new digital asset platform called Bakkt, which will offer physically-settled Bitcoin futures contracts.
The move by LCH is significant, as it demonstrates that traditional finance players are starting to take the crypto market seriously. It also provides institutional investors with a way to access the crypto market within a regulated environment, which is likely to encourage more investment in the space.
However, there are still concerns around the regulation of the crypto market, with many regulators around the world struggling to keep up with the fast-paced developments in the space. In addition, there are concerns around the volatility of cryptocurrencies, with Bitcoin experiencing significant price swings in recent years.
Despite these concerns, the crypto market continues to grow, with more and more players entering the space. As traditional finance players continue to explore opportunities in the market, it is likely that we will see more developments in the coming months and years.