Institutional investors are one step closer to accessing the Bitcoin investments as the US Commodity Futures Trading Commission has granted LedgerX registration status to the firm’s swaps execution facility.

As part of the regulator’s approval, LedgerX will not list cleared swaps until it has a clearing agreement with a derivatives clearing organization in place and submits the necessary revisions to its rulebook to the CFTC.

LedgerX plans to self-clear trades and filed for a DCO license with the CFTC on January 25, 2017.

“Without a clearing contract, you have to deal with all of the counter-party issues like who is trading with whom, what their creditworthiness is so that you can track it over time, especially when you engage in long-term options futures or swaps,” a LedgerX spokesperson told Markets Media. “By going to clearing, they can offer a complete order-book style trading exchange.”

LedgerX has been working closely with the CFTC to move the approval process ahead as quickly as possible, added the spokesperson.

As part of the process, LedgerX concluded a $11.4 million round of Series B funding led by Miami International Holdings and Huiyin Blockchain Venture Investments in May.

“The May fundraising was crucial to meet the financial commitments that the CFTC is looking for from for clearing firms,” said the spokesperson. “The regulators want a firm to have more than a year’s operating cost on hand. That funding achieved that and more.”

Once LedgerX receives a DCO license and begins trading on its venue, the firm’s management expects that access to bitcoin-based options will help stabilize the bitcoin market by offering a method to hedge positions not only for bitcoin miners but other bitcoin exchanges and investors.

Option contracts provide transparency regarding price discovery via publicly reported index values as well as large trader position reports, according to the spokesperson.

In the meantime, LedgerX is in the midst of conversations with multiple unnamed market-making firms to participate in the new market once it goes live.

However, some industry watchers are a bit bearish on bitcoin-based options as anything more than a novelty for institutional investors.

“It’s going to be a niche market for a long time, especially for what they are trying to do,” said Spencer Mindlin, an analyst at the Aite Group.

Mindlin sees LedgerX’s initial client base as liquidity providers, arbitrageurs, hedgers, and investors. Of those, he does not believe that investors will not be participating until there is an actual market.

“The markets we are talking are the corporate treasury departments of companies accepting dealing in bitcoin that are trying to hedge their currency risk in bitcoin,” he said.

LedgerX already has received interest from hedge funds, family offices, and money managers who have lacked the ability to use forwards, options, and swaps contracts to leverage and hedge exposure to the digital currency, according to the LedgerX spokesperson.

Mindlin also noted that once LedgerX has its DCO license and begins operation, it will make the bitcoin market a bit more transparent.

“It will be easy for firms to track growth on a monthly basis, which is a good thing,” he said.