CFTC Approves Bitnomial to Offer Futures Contracts Settled in Real Bitcoin

The U.S. Commodity Futures Trading Commission (CFTC) approved Bitnomial Exchange to operate as a designated contracts market (DCM), meaning the exchange can now offer bitcoin futures and options contracts.

The approval, granted Monday, brings a new player to the still-small world of bitcoin futures in the U.S.

To date, only CME, Cboe, Bakkt, ErisX and LedgerX offer bitcoin futures and options contracts, though Cboe ended its contract in early 2019 and ErisX sees little volume on its futures. Unlike CME, Bitnomial appears to be focusing strictly on physically-settled contracts, meaning customers receive the actual bitcoin when the contract expires, rather than the fiat equivalent.

The CFTC conducted an onsite technical evaluation of the exchange's operations before granting the approval, according to an order issued Monday.

Bitnomial said it was the "first and only startup exchange" to receive approval to offer both margined and physically delivered bitcoin futures and options contracts in the U.S.

"The approval allows Bitnomial to tackle a confluence of generational shifts in financial markets: First, a new generation of customers are emerging as savvy with trading, technology and delivery. Second, innovative new unregulated derivatives are booming with daily volumes topping $45 [billion] but may be illegal for many U.S. traders," it said in a press release.

The release also said Bitnomial hopes to find customers for what it termed "new growth areas," claiming the existing legacy firms have had difficulty tapping this base.

Bitnomial is now setting up user acceptance testing, expected to begin on April 27, and has opened user signups.

In a statement, founder and CEO Luke Hoersten said the company will start with quarterly futures, micro futures and options. Contracts trade on 37 percent margin and will settle on-chain rather than book entry.

Jump Capital's Peter Johnson said physically settled bitcoin futures contracts are "still largely inaccessible" to much of the U.S. market. Jump Capital backed Bitnomial, alongside Digital Currency Group, CoinDesk's parent firm.

"[Bitnomial's] products are also reliably tied to the underlying asset price via the option for physical delivery. We’re excited to be partners with a company that is committed to meeting the highest regulatory standards and increasing the accessibility of crypto derivatives to U.S. traders," he said in a statement.

Bitnomial raised $7.5 million in an equity raise from 12 investors last December, according to an SEC filing.