In a significant step towards expanding its service offering, Coinbase, the leading cryptocurrency exchange in the US, recently obtained regulatory approval to provide crypto futures trading services to eligible customers within the country.
The expansion of services was achieved when Coinbase Financial Markets Inc, a subsidiary of Coinbase, announced that it had received approval from the National Futures Association (NFA), a self-regulatory organisation designated by the Commodity Futures Trading Commission (CFTC), to operate as a futures dealer (FCM).
This development marks an important occasion, allowing Coinbase to offer eligible US customers access to cryptocurrency futures trading directly from its platforms.
Crypto exchange Coinbase will offer futures trading services in the US
Greg Tusar, Coinbase‘s vice president for institutional products, emphasised the importance of this regulatory approval, considering it a ‘milestone’ for the exchange.
He proudly stated that Coinbase is the “first crypto-native leader” to offer its verified customers a blend of traditional spot cryptocurrency trading alongside regulated and leveraged cryptocurrency futures.
The application for approval was initially submitted in September 2021 to the NFA. Tusar went on to elaborate on the global cryptocurrency derivatives market, highlighting its dominance in terms of trading volume, accounting for around 75% of all cryptocurrency trading worldwide.
He emphasised how this market serves as an essential entry point for traders.
One of the significant benefits Coinbase customers will gain from this development is the ability to trade on margin.
Trading on margin allows traders to leverage and access the cryptocurrency market with a lower initial investment than traditional spot trading.
This increased flexibility allows investors to take both long and short positions, making derivatives an essential tool for managing the risk associated with the underlying cryptocurrencies.
Crypto futures: Coinbase’s new feature is a major step for the exchange
Coinbase’s upcoming move will allow its customers to directly access futures trading through the Coinbase Financial Markets platform.
This platform has seen significant growth since last year’s acquisition of FairX, a CFTC-regulated futures exchange. It now operates as Coinbase Derivatives Exchange and welcomes third-party brokers, FCMs and market makers.
This strategic acquisition has allowed Coinbase to cultivate a deep pool of liquidity, with impressive figures such as $4.7 billion of Bitcoin (BTC) and $2 billion of Ethereum (ETH) futures traded in notional volume in the current year, according to Tusar.
The recent approval for futures trading comes on the heels of Coinbase Derivatives Exchange’s introduction of new futures contracts on Bitcoin and Ether aimed specifically at institutional clients.
Last year, the exchange introduced innovative ‘nano’ contracts on Bitcoin and Ether in response to growing institutional demand for advanced derivatives products.
Despite the developments, Coinbase is still in a legal battle with the SEC
However, amid these strides in expanding its offering, Coinbase is also embroiled in a legal battle with the US Securities and Exchange Commission (SEC).
The regulator filed a lawsuit against the company in June, alleging that Coinbase operated as an unregistered exchange, broker and clearing agency.
This legal hurdle underlines the complex landscape in which cryptocurrency exchanges navigate as they attempt to comply with ever-changing regulations.
Interestingly, prominent venture capital firms Andreessen Horowitz (a16z) and Paradigm recently intervened in support of Coinbase.
Both companies submitted a joint amicus brief highlighting concerns about the SEC’s regulatory approach and its potential impact on the development of blockchain technology in the US.
Coinbase itself filed a motion to dismiss the case in late June, arguing that the SEC’s actions deviate significantly from established legal frameworks.
Conclusions
In conclusion, Coinbase’s recent regulatory approval to offer cryptocurrency futures trading services to eligible US customers underlines the company’s commitment to innovation and expansion in the cryptocurrency space.
By being the first “crypto-native leader” to integrate traditional spot cryptocurrency trading with regulated and leveraged cryptocurrency futures, Coinbase has positioned itself at the forefront of a rapidly evolving industry.
As the exchange continues to face regulatory challenges and market demands, its quest to offer diverse and sophisticated trading options could potentially set the tone for the future of cryptocurrency trading in the US.
Source: https://en.cryptonomist.ch/2023/08/16/coinbase-adds-crypto-futures-offering/