A US federal regulator on Friday gave the go ahead to the CME Group Inc to start trading bitcoin futures later this month, the first time the digital currency is to be traded on a Wall Street exchange and subject to federal oversight.
The CME Group, which owns the Chicago Mercantile Exchange, will start trading bitcoin futures on Dec. 18, the company said.
The US Commodities Futures Trading Commission, the primary regulator for exchanges like the CME, gave approval for the exchange to create bitcoin futures after six weeks of discussions.
The CME Group is using a process known as “self-certification,” which is when an exchange pledges that the new instruments will not break any US federal securities laws.
The price of bitcoin futures will be based on the price the digital currency is going for on four major bitcoin exchanges — Bitstamp, GDAX, itBit and Kraken.
Due to its volatility, bitcoin futures will be subject to higher margin levels and intraday price limits, the CME said.
The move is to subject some of the bitcoin market to federal regulation for the first time.
It would also open up bitcoin trading to a larger group of investors and traders, who have been reluctant to purchase the virtual currency on the private exchanges.
Bitcoin has gained more mainstream attention as its price has soared on the private exchanges.
It was trading on Friday at about US$10,500, after being worth about US$1,000 at the beginning of the year.
NASDAQ president and chief executive officer Adena Friedman tamped down news reports that her exchange is planning to launch bitcoin futures trading next year.
On Thursday, she told CNBC that the tech-heavy New York exchange was still considering its next move.
“We actually haven’t announced anything,” she said. “I would just say that we have been having active dialogue with a lot of clients and with partners about what might be possible over time.”
Meanwhile, a chief US Federal Reserve banking oversight official on Thursday said that digital currencies, such as bitcoin, could pose a threat to financial stability as they gain wider use.
Newly installed Fed Vice Chairman for Supervision Randal Quarles raised concerns about how cryptocurrencies would behave in a crisis.
In a speech on the payments system, he said that in times of crisis, demand for liquidity among bank depositors often shoots up, putting major financial institutions under strain, but it is not clear how digital currencies would perform in similar situations.
Additional reporting by AFP
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