CME launching bitcoin futures in 2017 to give digital currency big push toward legitimacy

CME Group Inc, the world’s largest derivatives exchange operator, said on Tuesday it will launch a futures contract for bitcoin later this year, marking a major step in the digital currency’s path toward legitimacy and helping propel it to a fresh record high.

The new contract will be settled in cash, based on the CME CF Bitcoin Reference Rate (BRR), a once-a-day reference rate of the US dollar price of bitcoin. Bitcoin futures will be listed on the CME, as it races with rival CBOE Holdings Inc to become the first traditional financial marketplace to offer trading related to the notoriously volatile instrument.

“This is going to help tremendously with institutional support as well,” said John O’Rourke, president and director of Riot Blockchain Inc in Colorado, a Nasdaq-listed company focused on bitcoin and blockchain technology. “That may help manage the volatility. I know that some institutionals see that as a hiccup.”

Bitcoin jumped to an all-time high above US$6,400 on the BitStamp exchange after the CME news. It was last at US$6,358.85, up nearly 4 per cent, and has shot up more than six-fold this year.

The massive bitcoin rally has created a divide on Wall Street about whether it is a legitimate financial instrument and whether the industry’s heavyweights ought to have a hand in trading or making markets in it. Some crypto-currency exchanges have been hit by fraud and deception.