CME Group, the world’s largest futures exchange, is planning to launch bitcoin spot trading, capitalizing on surging demand from Wall Street money managers for exposure to the cryptocurrency sector.

Discussions are underway with traders seeking a regulated marketplace to buy and sell bitcoin, according to sources familiar with the talks.

This move, if finalized, would further integrate major financial institutions into the digital asset space, following the SEC’s approval of bitcoin investment stock funds in January. CME declined to comment.

The introduction of spot trading complements CME’s existing bitcoin futures market, allowing investors to employ “basis trades” – a strategy involving borrowing money to sell futures while buying the underlying asset, profiting from the price difference. CME is a major player in Treasury basis trades.

A shift in sentiment is evident among leading financial institutions, many of whom were previously skeptical of bitcoin.

This change is attributed to the cryptocurrency’s rebound from its 2022 lows to record highs earlier this year, growing investor acceptance, and regulatory crackdowns on illegal market activity.

Despite a recent price drop, exchange-traded funds linked to bitcoin remain the fastest-growing ETFs ever.

Large investors, including hedge funds and pension funds, have poured billions into vehicles managed by BlackRock, Fidelity, and Ark. BlackRock CEO Larry Fink even expressed long-term bullishness on bitcoin in March.

CME has emerged as a key beneficiary of renewed institutional interest, surpassing Binance as the world’s largest bitcoin futures market.

Their Chicago venue boasts over $8.5 billion in open positions, double the amount from a year ago.

While the specific details remain unclear, CME’s potential spot trading business could operate through the EBS currency platform in Switzerland, known for its stringent regulations on crypto asset trading and storage.

The track record of traditional exchanges in spot crypto trading is mixed. While Deutsche Börse launched a digital asset market this year, CME’s rival CBOE recently shut down its spot business citing a lack of clear US regulations.

Market observers question the efficiency of CME’s potential two-market structure (Chicago and Switzerland).

However, some see this move as a positive step towards established exchanges becoming more comfortable with the infrastructure needed for secure digital asset trading, potentially paving the way for crypto-related collateral for margin calls.