Due to growing demand from institutions, the London Stock Exchange (LSE) will provide clearing services for Bitcoin derivatives contracts.
The London stock exchange announced it would use the Paris arm of its clearing subsidiary, LCH, to handle the Bitcoin futures and options contracts on GFO-X.
GFO-X is a U.K.-based regulated digital assets exchange. The service will go live by Q4 2023 if the regulatory approvals are in favor.
Institutional Demand for Bitcoin
As some institutions are reluctant to hold Bitcoin due to regulatory challenges, there is a demand to trade crypto derivatives. A clearing house helps institutions as a mediator to help manage risk if one side defaults.
According to the Financial Times, LCH will settle the derivatives with cash and hold the margin for its crypto unit separately. Arnab Sen, the co-Founder of GFO-X, says:
Recent market events in the trading of digital assets have highlighted the need for a safe, regulated venue where large financial institutions can trade at scale, while keeping their clients’ assets protected. LCH delivers proven risk management capabilities across a range of asset classes and some of the most sophisticated clearing services in financial markets today. As the U.K.’s first regulated and centrally cleared trading venue focused entirely on digital asset futures and options, our joint vision is to ensure digital asset derivatives’ trading and clearing requirements and growing demand can be met within a secure, highly regulated environment.
Is the U.K. Falling Behind France in Race to Attract Web3 Businesses?
The move from the LSE comes as France has recently attracted major Web3 players. According to Bloomberg, companies like Binance, Crypto.com, and Circle have chosen Paris as their European base.
When Crypto.com chose Paris for its European headquarters, Ripple’s Ian Burge tweeted, “If the U.K. is serious about becoming a blockchain and crypto hub, mere words won’t achieve that. Crypto.com’s decision to locate in Paris is a clear win vs. London. We need to do more to attract the industry.”
Moreover, the London Stock Exchange’s peers, such as CME Group, CBOE Global Markets, and Deutsche Börse, already offer facilities to trade crypto wrapped in traditional products such as derivatives.
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