Swap execution facility (SEF) for Bitcoin TeraExchange, partners up with Bitcoin security platform BitGo to provide greater security in Bitcoin derivatives trading.
Institutional trading platform TeraExchange announced it has partnered with Bitcoin security platform and multi-signature technology pioneer BitGo to provide multisig blockchain-based custodial services for USD/Bitcoin swaps executed on its trading platform, stated the company in a release.
The SEF will use the blockchain and BitGo's multisig security platform to replace the physical third-party custodianship model, and both parties authorizations will be needed to execute funds. TeraExchange participants will get a BitGo Enterprise account and will have to establish a multi-sig custodian wallet, reads the statement.
According to the companies, this collaboration will allow TeraExchange to become the industry's first and only player to enable its clients to collateralize Bitcoin derivatives trades.
Co-founder and CEO of BitGo Will O'Brien stated:
"TeraExchange has proven to be a key player in the bitcoin derivatives market with the launch of their regulated platform last month. We are excited to be at the forefront of this fundamental shift in how the blockchain with BitGo multi-sig wallets are used to safely hold collateral for these types of swaps."
President and co-founder of TeraExchange Leonard Nuara believes "the relationship with BitGo fills in the missing piece of the Bitcoin derivatives trading workflow," adding that market participants can now "trade with the confidence of knowing that the required collateral is in place which serves to create a sage and sound marketplace."
CEO and co-founder of TeraExchange Christian Martin told CoinDesk:
"Historically USD or other fiat currencies, US Treasuries and investment grade debt has been used to collateralize trading activity. Now in addition to XBT being included in that menu of collateral – this is also the first time that the block chain is serving as the collateral repository for a regulated product on a regulated exchange."
TeraExchange and BitGo have already enrolled their first market participants, which include digital currency company digitalBTC, and provider of blockchain-based reward programs Ribbit.me.
"The combination of TeraExchange and BitGo is very powerful," said Ribbit.me's CFO and co-founder Gregory Simon. "The marketplace enables us to hedge our BTC price volatility risk, and BitGo's service gives me the peace of mind that my company's bitcoins are stored on the blockchain with the industry's best security technology and standards."
According to Martin, TeraExchange's expansion plans include adding other currencies in the near future, reported Sell-Side Technology. He added: "The entire cryptocurrency or digital commodity space is an area that we think has a great deal of growth potential over the next many years and we're excited to be an essential part of that growth."
On September 13, TeraExchange received regulatory approval from the Commodity Futures Trading Commission (CFTC) and became the world's first regulated platform for Bitcoin derivatives with a spot Bitcoin index. A month later, the exchange announced it had fulfilled the world's first Bitcoin derivatives trade, made between digitalBTC and a hedging counter-party.
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