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) transactions 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.”

Paul Ciavardini, director of itBit’s over-the-counter (OTC) cryptocurrency trading desk, added that institutional solutions such as EFP trades will “continue to reduce the friction” in the cryptocurrency marketplace.

The trade is also noteworthy because, as CCN.com reported, the U.S. Commodity Futures Trading Commission (CFTC) has thus far only approved bitcoin futures products that are cash-settled, meaning that investors receive the cash value of bitcoin when a contract expires, rather than the physical asset itself. With the availability of EFPs, they will have more flexibility in how they interact with this nascent asset class.

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