The U.S. Commodity Futures Commission said on Monday it has granted New York-based LedgerX, a bitcoin options exchange, the first license to clear and settle derivative contracts for digital currencies.

The license authorizes LedgerX to provide clearing services for fully collateralized digital currency swaps. LedgerX, which was also granted a license to operate as a swap execution facility early this month, initially plans to clear bitcoin options, the CFTC said in a statement.

The CFTC, however, also clarified in its statement that the approval of LedgerX's license "does not constitute or imply a commission endorsement of the use of digital currency generally, or bitcoin specifically."

With the settlement and clearing license, participants in the LedgerX trading platform will be able to hedge bitcoin and other digital currencies using exchange-traded and centrally cleared option contracts. Initially, LedgerX expects to list one- to six-month options contracts for bitcoin. Other digital currency contracts such as ethereum (ETH) options are expected to follow.

Eoin Treacy's view

You may remember back on March 10th when the Winklevoss twins failed to have an ETF approved for bitcoin on the basis that it was not regulated and it did not have the transparency of other asset classes. That decision held back the price for two weeks.

The decision to allow options trading introduces leverage to a market which has previously been dominated by unleveraged buy and hold investors. That suggests there is significant scope for even greater volatility. However, it is also worth considering what the introduction of options trading did to the Chinese A-Share market in 2015. The introduction of leverage resulted in a surge of interest in trading and the market spiked higher; more than doubling between July 2014 and June 2015.

Bitcoin surged last week on the increasing likelihood a resolution has been found to the question of limited supply and the impact that has on scalability. It is now pausing in the region of $3000 and a sustained move below the trend mean would be required to question the consistency of the medium-term uptrend.