CME Explores Cryptocurrency Derivatives Contracts in Patent Filing

Derivatives giant CME has developed a system for delivering digital currencies tied to futures contracts, patent documents reveal.

AccessTimeIconMay 5, 2017 at 1:25 p.m. UTC
Updated Sep 11, 2021 at 1:18 p.m. UTC

Derivatives giant CME has developed a system for delivering digital currencies tied to derivative contracts, patent documents show.

The US Patent and Trademark Office (USPTO) published CME's application on 4th May, entitled "System for Physically Delivering Virtual Currencies". At its heart, the concept envisions delivering cryptocurrency holdings tied to a particular contract without the clearing party actually taking possession.

The firm is already known to be looking, at least conceptually, at the idea of derivatives contracts for bitcoin miners. As previously reported by CoinDesk, the proposed derivatives would enable miners to more effectively hedge against the ever-increasing difficulty of mining (the energy-intensive process by which new transactions are added to the blockchain), as well as the declining value of their mining hardware.

The new application indicates that CME is looking at additional products tied to the tech, with the firm explaining:

"A clearing counter-party could facilitate physical delivery of virtual currency contracts by instructing the sellers of expiring contracts to transfer the virtual currencies directly to the clearing counter-party, and the clearing counter-party would then transfer the virtual currencies to the buyers."

That CME would be looking into this area is perhaps unsurprising. Last November, it launched a pair of bitcoin price benchmarks, which would ostensibly serve as part of the infrastructure for any products it may facilitate.

What’s more, the firm's executives have previously discussed the prospects of financial products around digitized assets.

"In fact, some of the most exciting areas to explore are at the intersection of digital assets and tokenized fiat and tokenized commodities,” CME executive director and digitization lead Sandra Ro said during an event last November.

Ro is one of three inventors listed on the patent application, along with digitization director and technology architect Ryan Pierce, and Mansoor Ahmed, who serves as director of clearing for the firm.

CME image via Shutterstock

Disclosure: CME Group is an investor in Digital Currency Group, of which CoinDesk is a subsidiary.


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