A federal regulator gave the go ahead on Friday to the CME Group to start trading bitcoin futures later this month, the first time the digital currency will 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 Dec. 18, the company said. The 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 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 higher margin levels and intraday price limits, the CME said.
The move will subject some of the bitcoin market to federal regulation for the first time. It will 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 lately as its price has soared on the private exchanges. It was trading Friday at around $10,500, after being worth roughly $1,000 at the beginning of the year.
The critics
Nobel winners and business tycoons lined up last week to criticize bitcoin, the digital currency that has shattered records on its way past $11,000.
The harshest assessment came from Nobel laureate Joseph Stiglitz, who said that bitcoin “ought to be outlawed.”
“Bitcoin is successful only because of its potential for circumvention,” he told Bloomberg TV. “It doesn’t serve any socially useful function.”
Robert Shiller, who won a Nobel for his work on bubbles, said the currency appeals to some investors because it has an “anti-government, anti-regulation feel.”
“It’s such a wonderful story,” he said at a conference in Lithuania, according to Bloomberg. “If it were only true.”
Wall Street titans were getting in on the action, too.
Goldman Sachs CEO Lloyd Blankfein told Bloomberg that the currency serves as “a vehicle for perpetrating fraud.” Billionaire investor Carl Icahn said on CNBC that it “seems like a bubble.”
The digital currency previously attracted the derision of JPMorgan boss Jamie Dimon, who called it a “fraud” that would “eventually blow up.” Warren Buffett has warned of a “real bubble.”
