CME plan to offer spot Bitcoin trading opens ‘world of opportunity’ for Wall Street

CME plan to offer spot Bitcoin trading opens ‘world of opportunity’ for Wall Street
Traditional finance players are offering investors more opportunities to trade with Bitcoin. Credit: Shutterstock / Shutterstock.AI
  • CME Group is planning to offer spot Bitcoin trading on its futures exchange, according to a report.
  • The move marks further Wall Street encroachment into crypto.
  • Hedge and pension funds are more likely to use these services than those offered by Coinbase, an analyst says.

CME Group’s plans to offer spot trading for Bitcoin on its futures exchange sets it up to scoop up clients from native crypto firms, marking further encroachment by Wall Street into the realm of crypto.

The exchange has been conducting talks with traders looking to dive deeper into crypto, the Financial Times reported Thursday, citing three people with direct knowledge.

It’s a sign more Wall Street firms are seizing on opportunities in crypto after BlackRock’s Bitcoin ETF sparked a record-breaking flood of new money into the sector.

“This is big,” Jonathan de Wet, chief investment officer at digital asset trading firm Zerocap, told DL News. “Spot margining on the CME opens a world of opportunity for TradFi institutions.”

While still in the planning stages, Ryan McMillin, chief investment officer at crypto fund manager Merkle Tree Capital, told DL News that hedge funds, pension and sovereign funds are more likely to engage with CME rather than crypto-native firms like Coinbase.

The reason? Those firms don’t have the same relationship with Coinbase as they do with CME.

While still under consideration, CME offering spot trading would provide a one-stop shop for investors to spot margin trade on CME, opening opportunities for Wall Street to take a bigger punt on Bitcoin outside ETFs.

Spot margin trading allows entities to borrow funds to increase their position size on the spot market, leveraging their trades and potentially amplifying gains and losses.

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De Wet said providing further regulated institutional access points would likely fuel adoption among a risk-averse investor class.

He pointed to an “exhaustive process” for larger fiduciary investors to undergo due diligence as a reason for why they would opt for CME’s offering.

Coinbase is one of the few crypto exchanges operating in the US under a regulated banner following its 2021 Nasdaq listing.

Others include Kraken, which is regulated under the Financial Crimes Enforcement Network, and Gemini, which also answers to the New York State Department of Financial Services.

Hedge and pension funds have already leapt on the opportunity to dive deeper into crypto this year.

And the State of Wisconsin Investment Board has bought $99 million of iShares Bitcoin Trust — BlackRock’s spot Bitcoin exchange-traded fund — on the back of it and nine similar ETFs being launched in the US this year.

CME did not return DL News’ request for comment.

Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.

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