Collaboration for Crypto Derivatives Regulation
In an effort to provide a structured and safe environment for crypto derivatives, Gibraltar has announced a collaboration with the cryptocurrency exchange Bullish, which has notable backing from billionaire investor Peter Thiel. This partnership is designed to establish a regulatory framework that distinctly divides trading from settlement processes for crypto derivative contracts, a move aimed at enhancing market integrity and risk management in the digital currency space.
Addressing Regulatory Gaps
The Gibraltar Financial Services Commission and the local government are joining forces with Bullish to address a critical gap in the existing regulatory landscape, where there currently is no dedicated regulation for the clearing operations within the cryptocurrency sector. Tom Farley, Bullish’s CEO, emphasized the necessity of adopting stringent risk management practices akin to those thriving in conventional financial markets, saying:
“The absence of regulatory structures specifically for crypto clearing presents a challenge that we are eager to tackle. Our initiative draws on the robustness of frameworks like EMIR and Dodd-Frank, which have transformed traditional derivatives trading.”
Independent Clearing House and Market Participation
Central to this initiative is the introduction of a distinct clearing house that operates independently from the exchange itself, a step intended to enhance transparency and mitigate risks for participants in the market. Although specific cryptocurrencies eligible to serve as collateral have yet to be disclosed, the framework is expected to broaden the range of institutions permitted to hold such collateral, thereby fostering greater participation and trust within the crypto market.
Gibraltar’s Role in Financial Innovation
Gibraltar has positioned itself as a pioneer in regulatory clarity, having been the first jurisdiction worldwide to implement legislation accommodating companies utilizing distributed ledger technology. Nigel Feetham KC MP, the Minister for Financial Services, noted this initiative as part of Gibraltar’s long-standing tradition of adopting innovative financial technologies.
Future of Bullish’s Services
In the upcoming months, Bullish plans to roll out its clearing services and launch options trading. However, specific timelines for these developments remain unspecified. Initially established in 2021 by Brendan Blumer’s Block.one, Bullish has attracted considerable funding, amassing $10 billion, including both cash and cryptocurrency assets, with an initial contribution comprising $100 million, 164,000 BTC, and 20 million EOS, followed by an additional $300 million raised through a strategic investment round.
