In a landmark development for cryptocurrency market infrastructure, Peter Thiel-backed exchange, Bullish, has partnered with the Government of Gibraltar and the Gibraltar Financial Services Commission (GFSC) to develop the world’s first regulatory framework for clearing and settlement of derivative contracts in virtual assets.
This groundbreaking initiative aims to transform how crypto derivatives are cleared and settled, addressing a critical gap in the current cryptocurrency ecosystem.
Bridging Traditional Finance And Crypto
The innovative framework will create a regulated clearing house entity separate from the exchange, mirroring traditional financial markets while adapting to the unique characteristics of digital assets. Under the proposed regulations, select cryptocurrencies could be used as collateral and settlement currency, expanding beyond the limitations of traditional fiat-based clearing systems.
“There is currently no regulation that specifically addresses the clearing needs of the crypto industry,” explained Tom Farley, Bullish Group CEO, on their website.
“This initiative will bring the same robust risk management and regulatory oversight to the crypto clearing space that EMIR & Dodd-Frank brought to traditional derivatives markets.”
The collaboration aims to solve a persistent problem in crypto markets, where major exchanges have been performing clearing functions without appropriate regulatory oversight. By introducing a regulated, independent clearing house with improved transparency and capitalization requirements, the framework enhances protections for market participants while reducing systemic risks.
Gibraltar’s Minister for Financial Services, the Hon Nigel Feetham KC MP, highlighted the territory’s pioneering approach: “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.”
New Global Crypto Market Standards
Bullish plans to introduce its Clearing Services alongside options trading later this year as an initial step toward establishing a standalone clearing house under the new regulatory framework. The exchange is strategically positioned to implement this vision, holding licenses from the GFSC, Germany’s BaFin, and Hong Kong’s Securities and Futures Commission.
“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,” stated Randi Abernethy, Head of Clearing and Group Risk at Bullish. The company expects to become “the first operational regulated digital assets clearing house in the world.”
The framework addresses several key challenges in the crypto derivatives market by expanding the range of institutions authorized to hold collateral, enhancing market integrity, and introducing standardized risk management practices. This separation of trading and settlement functions mirrors traditional financial markets while embracing the unique capabilities of blockchain technology.
Launched in 2021 with backing from Peter Thiel and Block.one’s Brendan Blumer, Bullish received initial funding of $10 billion, including $100 million in cash, 164,000 Bitcoin, and 20 million EOS. The exchange later secured an additional $300 million through strategic investment, positioning it as a well-capitalized player capable of building institutional-grade market infrastructure.
