Swap execution facility (SEF) TeraExchange has partnered with Bitcoin security platform BitGo to provide multi-signature, blockchain-based custodial services for USD/Bitcoin swaps executed on its SEF, according to a company statement.
“By partnering with BitGo,” the statement says, “TeraExchange is the only player in the industry to provide its market participants with the ability to collateralize bitcoin derivative trades in a completely secure and auditable trading environment.”
TeraExchange’s institutional trading platform will use Bitcoin’s cryptographic ledger system, known as the blockchain, in combination with BitGo’s multi-sig security platform to replace the physical third-party custodianship model required of traditional collateral depositories, according to the statement.
“The relationship with BitGo fills in the missing piece of the Bitcoin derivatives trading workflow,” says Leonard Nuara, president and co-founder of TeraExchange, in a statement. “Participants can now trade with the confidence of knowing that the required collateral is in place, which serves to create a safe and sound marketplace.”
In September, TeraExchange became the first regulated SEF to trade bitcoin derivatives, and created the first spot Bitcoin price index.
Under the terms of the new partnership, participants on TeraExchange will maintain a BitGo Enterprise account and establish a multi-sig, custodial wallet, according to the statement.
BitGo’s platform ensures that bitcoins deposited as collateral for USD/Bitcoin swaps are held securely on the blockchain and transactions sent from the enterprise wallet will require BitGo’s multi-sig approval process. “This approach establishes auditable bitcoin collateral, creating a complete electronic trading lifecycle for bitcoin derivatives trading,” the statement says.
“The combination of TeraExchange and BitGo is very powerful,” says Gregory Simon, chief financial officer, co-founder of Ribbit.me and creator of RibbitRewards, the world’s first rewards program using blockchain technology, in a statement. “The TeraExchange marketplace enables us to hedge our BTC price volatility risk,” Simon says. The BitGo service gives Simon “the peace of mind that my company’s bitcoins are stored on the blockchain,” he says.
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