In a significant move, Coinbase, America’s largest cryptocurrency exchange, has received the green light from U.S. regulators to introduce crypto futures trading services to qualified clients.
Coinbase U.S. Regulatory Approval for Crypto Futures
The company’s subsidiary, Coinbase Financial Markets Inc., announced that it has obtained the necessary regulatory approval from the National Futures Association (NFA). The NFA is a self-regulatory body designated by the Commodity Futures Trading Commission (CFTC), and this approval permits Coinbase to function as a futures commission merchant (FCM).
Significance of NFA’s Approval, According to Coinbase
Greg Tusar, Coinbase’s Vice President of Institutional Product, emphasized the significance of this development in a press statement. He labeled the approval as a “pivotal milestone,” highlighting that Coinbase is the first crypto-centric firm to offer regulated crypto futures trading alongside its existing spot crypto trading services to its verified clientele.
In 2021, Coinbase had initiated the application process with the NFA to register as an FCM. Tusar noted the vast potential of the global crypto derivatives market, which, as per his statement, accounts for approximately 75% of the total crypto trading volume across the globe.
Access to Futures Through Coinbase Financial Markets
Tusar elaborated on the advantages of this move: “The margin trading feature provides our customers with the leverage they need to enter the crypto market with a lower initial investment compared to traditional spot trading. Furthermore, derivatives allow investors to manage the risks associated with their crypto holdings effectively.”
Coinbase has also informed that its clients will have direct access to futures via Coinbase Financial Markets in the near future.
In a significant move last year, Coinbase acquired FairX, a futures exchange regulated by the CFTC. Now known as the Coinbase Derivatives Exchange, it has already engaged third-party brokers, FCMs, and market makers. Tusar reports that the exchange has built a strong liquidity pool, with notional volumes of $4.7 billion in BTC futures and $2 billion in ETH futures traded this year.
Ongoing SEC Lawsuit Against Coinbase
This regulatory nod comes as Coinbase is enmeshed in a legal battle with the U.S. Securities and Exchange Commission (SEC). The SEC filed a lawsuit against the company in June, accusing it of operating as an unregistered exchange and broker.
Last week saw prominent investment firms Andreessen Horowitz (a16z) and Paradigm file a joint amicus brief in support of Coinbase, denouncing the SEC’s approach as a harmful overreach.
