Following the addition of bitcoin futures to the Chicago Mercantile Exchange in the United States, foreign exchanges are following suit. CoinfloorEX, a cryptocurrency exchange based in London, announced on Wednesday that they would be adding bitcoin future contracts to their platform next month.
According to a report from Reuters, CoinfloorEX’s futures contracts will be physically settled, which means that the actual assets (in this case bitcoin) will be delivered. On all of the competing exchanges the assets are cash settled.
Coinfloor’s co-founder Mark Lamb explained the new feature to Reuters, saying, “When you talk to the liquidity providers, they all say the same thing, which is they want a physically delivered futures contract so they can hedge their exposure across exchanges.”
The idea of cash settled bitcoin futures are controversial, and many experts have claimed that the process can be easily manipulated to set futures prices into their favor when the price is based on a single exchange.
Although Coinfloor’s cash settlement system mitigates against fraud and manipulation, the U.S. Commodity Futures Trading Commission announced that they would create a thorough review process for all further futures contracts released in the US. The UK government has not yet commented on additional review processes for cryptocurrency futures products.
Coinfloor is the largest spot exchange in the UK, and is one of many exchanges, including Bitmex, CryptoFacilities, CME Group, and the CBOE, to offer futures trading products to their customers.
It was started in March of 2014 and owns Coinfloor Exchange Gibraltar as well as CoinfloorEX. They claim that their process is strictly modeled against the regulatory standards for the UK’s Anti-Money Laundering and KYC requirements. They also provide monthly Provable Solvency reports through their auditing agency.