Bullish, one of the regulated virtual asset exchanges, announced its partnership with the Gibraltar Government and the Gibraltar Financial Services Commission (GFSC) to develop the regulation for the clearing and settlement of “derivative contracts settled in virtual assets.”
This innovation will enable virtual asset derivative contracts to be cleared and settled in virtual assets by “a recognized clearing house for the first time.”
This initiative moves beyond the “limitations of traditional fiat-based clearing and settlement infrastructure and marks a milestone in the evolution of virtual asset regulation.”
Over the past six months, Bullish and the GFSC have collaborated and agreed to create a regulatory framework “that adapts traditional finance clearing regulations with the requirements and capabilities of the virtual asset market.”
For example, under the proposed clearing framework, “select virtual assets may be eligible as collateral and settlement currency.”
The selection criteria will follow the principles “underpinning existing traditional clearing regulations.”
Additionally, the framework will expand the “range of institutions authorized to hold collateral, enhancing market integrity and participation while mitigating key risks.”
Virtual asset exchanges have been “performing the clearing function without appropriate regulatory oversight, leading to failures impacting customers.”
The proposed regime introduces “a regulated clearing house entity, separate and independent from the exchange and its participants, with improved transparency and capitalization to strengthen market infrastructure protection.”
In a separate announcement, His Majesty’s Government of Gibraltar expressed its enthusiasm for the framework, which “fosters trust, resilience, and integrity in virtual asset markets.”
Bullish welcomes their announcement and is pleased to “work alongside the government and GFSC to bring this regulatory framework to fruition.”
Tom Farley, Bullish Group CEO said:
“There is currently no regulation that specifically addresses the clearing needs of the crypto industry. We aim to change that by introducing a framework that manages risk for virtual asset trading and is aligned with traditional market infrastructure standards.”
They added:
“While Central Counterparties have become more robust in other asset classes, this initiative will bring that same robust risk management and regulatory oversight to the crypto clearing space that EMIR & Dodd-Frank brought to traditional derivatives markets. We welcome the announcement from the government of Gibraltar and look forward to introducing our joint proposal to the market.”
The Hon Nigel Feetham KC MP, Minister for Financial Services adds:
“Gibraltar is renowned for pioneering clear regulation and embracing forward-looking technology, being the first jurisdiction globally to introduce legislation for firms using Distributed Ledger Technology. We are excited to deepen our relationship with Bullish and to introduce this unprecedented virtual asset clearing solution to the market.”
In anticipation of the new framework, Bullish plans to “introduce its Clearing Services offering alongside Options trading later this year.”
This initial launch will integrate a variety of clearing benefits “into the market as Bullish moves toward establishing a standalone clearing house under the new regulatory framework.”
With licenses from the GFSC, the German Federal Financial Supervisory Authority (BaFin), and the Hong Kong Securities and Futures Commission (SFC), Bullish says it is “positioned to set the standard for virtual asset clearing solutions.”
Randi Abernethy, Head of Clearing and Group Risk at Bullish said:
“Our long-term goal is to establish a robust regulatory framework that not only meets the current needs of the virtual asset ecosystem but also anticipates future developments. This initiative underscores our commitment to operating a regulated, compliant exchange that supports institutional participation with an end-to-end clearing solution.”
They added:
“Several market participants have already voiced strong support for our business model because they recognize the value of regulated central clearing. We look forward to Bullish becoming the first operational regulated digital assets clearing house in the world.”
In advance of this, Bullish will reportedly form a clearing member working group to bring industry professionals together to “share their expertise, establish the initial clearing network, and enhance the robustness of Bullish’s clearing ecosystem.”