CME executives proposed expanding the group's business into Bitcoin mining. Is this good for the crypto industry?

The cryptocurrency space is full of surprises. The latest surprise came from Dante Federighi, a nominee for CME Group’s board of directors, who proposed that CME Group start a bitcoin mining business.

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CME Group "should be ahead of this trend"

One might not immediately see the connection between CME’s existing bitcoin derivatives trading market and the establishment of a mining farm. After all, China currently has about 65% of the bitcoin network’s computing power.

Rather than being “ahead of the curve,” this is more of a race to catch up. Don’t forget that China has plenty of cheap energy and mining technology. Especially in today’s competitive mining environment, operating a profitable mine is not that simple.

Still, that doesn't seem to scare Federici, who has a background in investing in the energy industry.

The co-founder of Fortezza Forza RMC Fund LLC detailed CME’s growth plans in a letter to shareholders filed this week with the U.S. Securities and Exchange Commission (SEC). He said that mining Bitcoin and other cryptocurrencies will enable the group to generate additional profit sources for shareholders:

“Some of our largest investors, such as BlackRock, are shifting their investments to companies that can create value for all stakeholders…CME Group needs to get ahead of this trend by building solar/wind/hydro plants to power our global operations. Then shift the excess energy to mining Bitcoin and other cryptocurrencies.”

Bitcoin mining is not CME’s “core business”

Federici, one of three Class B-2 directors nominated by CME Group, said CME Group should consider investing in new businesses such as energy plants. This would be beneficial to shareholders because excess energy could be used to mine cryptocurrencies.

Federici believes that CME Group can quickly convert mined cryptocurrencies into fiat currencies with its ability to "match and clear trades." He admitted that mining Bitcoin seems a bit out of CME's regular business, but he believes:

“While this may seem outside of our core business, I think it is something we should develop. We match and settle trades just like miners do. We convert all newly mined cryptocurrencies into fiat currency… Net profit is another new source of income for shareholders; a deep understanding of new technologies changes CME’s global trading landscape and increases investor exposure to ESG-focused businesses. It’s a win-win business.”

Is it good for the crypto space?

The fact that a major US institutional investor is looking to move into Bitcoin mining is certainly a bullish sign for the space. However, it remains to be seen whether Federici will be elected to the board and whether his plans are well thought out and sufficient to compete in this challenging industry.