Some big financial players are moving to lure more mainstream investors into the market for the volatile cryptocurrency, even before regulators have agreed on just what bitcoin is.
Two U.S. exchanges, including the parent of the venerable Chicago Mercantile Exchange, are racing to embrace bitcoin, dragging federal regulators into a realm skeptics call a fad and fraud.
The development shows how some big financial players are moving to co-opt the volatile cryptocurrency and lure more mainstream investors into the market, even before regulators have agreed on just what bitcoin is.
Bitcoin was trading Friday at around $10,500, after being worth roughly $1,000 at the beginning of the year. It reached a record high of $11,434 on Wednesday.
CME Group’s bitcoin futures contracts will debut Dec. 18. Cboe Global Markets didn’t announce a start date. Both got the green light Friday after going through a process called self-certification — a pledge to the U.S. Commodity Futures Trading Commission (CFTC) that the products don’t run afoul of the law.
The moves are a watershed for Wall Street professionals — including institutional investors and high-speed traders — who’ve been eager to bet on cryptocurrencies and their wild swings, but worried about doing so on mostly unregulated markets. The new products are subject to CFTC oversight. CME, Cboe and Cantor Fitzgerald’s Cantor Exchange — which is creating another kind of bitcoin derivative, binary options — promised to help the agency surveil the underlying bitcoin market.
“Bitcoin, a virtual currency, is a commodity unlike any the commission has dealt with in the past,” CFTC Chairman Chris Giancarlo said in a statement Friday. “We expect that the futures exchanges, through information sharing agreements, will be monitoring the trading activity on the relevant cash platforms.”
Trading in bitcoin and other cryptocurrencies is largely unregulated, and that’s the point. Bitcoin was introduced in the wake of the 2008 financial crisis as a way of avoiding governments and central banks. Now with its meteoric rise and the proliferation of cryptocurrencies, banks, brokers and mainstream investors want in. And they want regulation.
“The launch of the futures will actually make the market healthier,” Cboe President Chris Concannon said Friday. “It will create pricing equilibrium in the market. Clients who are holding bitcoin now have no way to hedge…