(Kitco News) – The Chicago Mercantile Exchange (CME), the world’s largest futures exchange, is reportedly planning to launch Bitcoin (BTC) trading in an effort to capture some of the U.S. market from Coinbase as institutional investors begin to increase their exposure to the cryptocurrency market.
According to a report from the Financial Times, the CME Group has been in discussions with investors looking to buy and sell BTC on a regulated marketplace, according to three sources with direct knowledge of the talks.
CME is currently the top Bitcoin futures exchange by open interest in the world – capturing the title from Binance in 2023 – and it is now setting its sights on dominating the U.S. spot Bitcoin market, a title currently held by Coinbase, which also serves as the surveillance sharing agreement partner for the U.S.-listed spot BTC exchange-traded funds (ETFs).
The sources said CME’s spot trading business will be run through the EBS currency trading venue in Switzerland, which has extensive regulations governing the trading and storing of crypto assets.
Hosting both a spot and futures BTC market would allow traders on CME to place what are known as basis trades, a common strategy that involves borrowing money to sell futures while buying the underlying asset, and extracting gains from the small gap between the two.
“The bulk of the Treasury basis trade takes place on CME venues,” FT said.
One crypto trading executive told FT that the move could eventually lead to large regulated exchanges accepting crypto-related collateral, such as tokenized money market funds, to make more timely margin calls.
Markus Thielen, founder of 10x Research, said the move could attract the attention of institutional investors who prefer using regulated exchanges.
“Crypto exchanges might lose some business with the potential debut of a Bitcoin spot market on the CME, a global derivatives giant, as the present bull run is particularly driven by institutions, who prefer to trade on regulated avenues," Thielen said.
This move by CME comes as the number of institutions with exposure to Bitcoin via the ETFs is accelerating at a rapid pace, with pension funds and banks like Morgan Stanley disclosing their holdings via 13F filings with the Securities and Exchange Commission (SEC) in recent weeks.
Many are also looking to acquire exposure ahead of the predicted next leg up in the Bitcoin bull market, which has paused above $60,000 over the past couple of months following the 350% rally BTC experienced since the start of 2023.
Despite BTCs 11% decline from its March peak above $73,000, the Bitcoin ETFs set records as the fastest-growing ETFs of all time, though their flows have stabilized in recent weeks while Bitcoin’s price consolidated.
