A self-proclaimed “global pioneer” in the derivatives marketplace, Tera Group, Inc., today announced a legal framework for bitcoin swaps — effectively allowing investors to swap payments based on how bitcoin is performing in comparison to a fiat currency.
Tera, according to their announcement, has put together terms for what is said to be a “multi-million dollar” swap that involves two United States institutions over a 25-day time frame.
“The use of a bitcoin swap is an inflection point in the evolution of crypto-currency,” said tera CEO Christian Martin. “There is incredible momentum and support behind this alternative global currency. But even with all this excitement it is critical that the market participants have tools at their disposal to hedge their price risk.”
According to Tera, “In a typical example, the swap will be used by a seller to protect itself from the price risk of bitcoin accepted in a commercial transaction.”
These types of transactions are not regulated, and as such, Tera is looking for permission from the Commodity Futures Trading Commission (CTFC) to be able to offer similar swaps on regulated marketplaces.
“The infrastructure and regulatory protocols already exist in the conventional OTC swaps markets to support these hedging instruments,” Leonard T. Nuara, company President said. “Regulatory approval is crucial to the long-term growth of the market utilizing bitcoin.”
Assuming the transactions are approved, the company hopes to make the swaps available on their own TeraExchange swap execution facility. [source: PRNewswire, Bloomberg]
