Institutional Investors Swap Bitcoin Futures for Physical BTC in Wall Street First
Bitcoin took a significant step toward becoming a mainstream financial instrument this week, as two institutional investors completed the first-ever exchange for physical (EFP) transaction involving bitcoin futures.
The CME EFP Bitcoin transaction, facilitated by E D & F Man Capital Markets, a registered futures commission merchant, and itBit, an institutional-grade cryptocurrency exchange, saw two institutional traders swap a position in CME’s bitcoin futures market for an equivalent amount of the “physical” asset itself.
Wall Street traders use EFPs to hedge their futures positions and diversify their exposure to specific assets. They may also provide firms with leverage, capital, tax, and liquidity benefits. EFP transactions are negotiated off-exchange, often with the assistance of a broker, and then reported to the exchange for settlement.
While common in commodities trading, itBit and E D F & Man said that this transaction marked the first time that an EFP has been reported to a U.S. futures exchange where the underlying physical asset was a cryptocurrency.
Commenting on the trade, Brooks Dudley, of E D & F Man Capital Markets Inc., said that it marked an important step in the maturation of bitcoin as a regulated asset:
“Every day we facilitate EFPs for our clients in physical assets such as soybeans, wheat and treasuries. EFPs on CME Bitcoin futures mark an important step forward in the maturity of the regulated derivatives market for digital currencies.”