DerivaDEX Launches Bermuda-Licensed DAO Derivatives Exchange

DerivaDEX has launched a Bermuda-licensed crypto derivatives platform, becoming what it says is the first DAO-governed decentralized exchange to operate under formal regulatory approval.

According to a statement from the platform, the exchange received a T license from the Bermuda Monetary Authority and has begun offering crypto perpetual swaps trading to a limited number of advanced retail and institutional participants.

The BMA’s T, or test license, is issued for a digital asset business seeking to test a proof of concept.

At launch, DerivaDEX supports major crypto perpetual products and said it plans to expand into additional markets, including prediction markets and traditional securities. The company said the platform combines offchain order matching with onchain settlement to Ethereum, while allowing users to retain noncustodial control of funds.

DerivaDEX also said the platform, developed by DEXLabs, uses encrypted order handling and trusted execution environments, which are intended to mitigate front-running and other forms of market manipulation.

A decentralized autonomous organization, or DAO, is a blockchain-based governance structure in which token holders collectively vote on decisions according to rules encoded in smart contracts rather than relying on a traditional management hierarchy.

Related: Fed paper proposes initial margin weights for crypto-linked derivatives

Traditional asset managers move into DeFi infrastructure

DerivaDEX’s launch comes as traditional asset managers are increasingly engaging with decentralized finance infrastructure on public blockchains.

On Feb. 11, BlackRock made its tokenized US Treasury product, the USD Institutional Digital Liquidity Fund (BUIDL), available on the decentralized exchange Uniswap. The move allows institutional investors to trade the tokenized fund onchain, and included BlackRock purchasing an undisclosed amount of Uniswap’s governance token, UNI.

A few days later, Apollo Global Management agreed to acquire up to 90 million governance tokens of decentralized finance protocol Morpho over four years, representing 9% of the token’s 1 billion total supply. The $940 billion asset manager said the agreement includes supporting Morpho’s decentralized lending infrastructure.