UK-based Coinfloor to launch physically settled bitcoin futures

A token of the virtual currency Bitcoin is seen placed on a monitor that displays binary digits in this illustration picture, December 8, 2017. Picture taken December 8. REUTERS/Dado Ruvic/Illustration

(This version of the March 14 story corrects second paragraph to say the new trading platform is based in the British Virgin Islands, not London, where the company and its spot exchange are based)

BOCA RATON, Fla. (Reuters) - Cryptocurrency exchange operator Coinfloor said on Wednesday it will launch a futures exchange for digital assets that will include the first physically delivered bitcoin futures contracts next month.

The new British Virgin Islands-based trading platform, known as CoinfloorEX, is aimed at hedge funds, proprietary trading firms and sophisticated retail investors, as well as cryptocurrency miners, Mark Lamb, co-founder of Coinfloor, said in an interview.

“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,” he said on the sidelines of the Futures Industry Association’s annual conference in Boca Raton, Florida.

Some traditional futures exchanges, including those run by Cboe Global Markets Inc and CME Group Inc, already offer bitcoin futures. But they are cash settled, meaning the actual cryptocurrency does not change hands.

Many proprietary trading firms and large investors have voiced concerns that the cash-settled process can be manipulated too easily, as bad actors can attempt to move the price of the indexes or auctions on spot exchanges that set the futures prices in their favor, Lamb said.

The first physically delivered contract launches in April.

Coinfloor, which includes the closely held Chicago-based proprietary trading firm DRW among its investors, was started in 2013 and runs the largest UK-based cryptocurrency spot exchange in London and another spot exchange Gibraltar.

Reporting by John McCrank in Boca Raton, Florida; Editing by Dan Grebler