NEW YORK (Reuters) - The U.S. Commodity Futures Commission said on Monday it has granted New York-based LedgerX, a bitcoin options exchange, the first license to clear and settle derivative contracts for digital currencies.

The license authorizes LedgerX to provide clearing services for fully collateralized digital currency swaps. LedgerX, which was also granted a license to operate as a swap execution facility early this month, initially plans to clear bitcoin options, the CFTC said in a statement.

The CFTC, however, also clarified in its statement that the approval of LedgerX’s license “does not constitute or imply a commission endorsement of the use of digital currency generally, or bitcoin specifically.”

With the settlement and clearing license, participants in the LedgerX trading platform will be able to hedge bitcoin and other digital currencies using exchange-traded and centrally cleared option contracts. Initially, LedgerX expects to list one- to six-month options contracts for bitcoin. Other digital currency contracts such as ethereum (ETH) options are expected to follow.

Ethereum is another online public ledger much like bitcoin, but with self-executing transactions.

“Having a regulated clearing house will open the market to a lot of other investors such as the large institutions,” said Paul Chou, chief executive officer of LedgerX, in an interview.

“A proper regulatory framework will open up the market and make them comfortable.”

The license took more than two years to win approval partly because of a long education process, said Chou, who also sits on the CFTC’s Technology Advisory Committee.

To get the clearing license, LedgerX secured $11.4 million in funding in May led by Miami International Holdings Inc and China’s Huiyin Blockchain Venture Investments.

“We are seeing strong demand from institutions that previously could not participate in the bitcoin market due to compliance restrictions against unregulated venues,” said Chou.

He said fund managers want to hold financial instruments that are not correlated with the broader equity market, and digital currencies meet that need.

Founded in 2013, LedgerX first received a temporary approval to operate as a swap execution facility in 2015.