Coinbase receives the necessary regulatory clearance to provide cryptocurrency futures trading services for eligible customers

Coinbase receives the necessary regulatory clearance to provide cryptocurrency futures trading services for eligible customers

Coinbase, the leading cryptocurrency exchange in the United States, has received regulatory authorization to provide cryptocurrency futures trading services to eligible clients in the country. The approval was granted by the National Futures Association, a self-regulatory body appointed by the Commodity Futures Trading Commission. Coinbase Financial Markets Inc. has been approved to operate as a futures commission merchant (FCM), allowing qualified U.S. customers to access cryptocurrency futures through its platforms.

Greg Tusar, Coinbase’s Vice President of Institutional Product, emphasized the significance of this approval, considering it a significant achievement. He stated that Coinbase is the first prominent crypto-native entity to offer both traditional spot crypto trading and regulated, leveraged crypto futures to verified clients. The application for FCM registration was submitted in September 2021, recognizing the global prominence of the crypto derivatives market, which accounts for approximately 75% of worldwide crypto trading volume. This market serves as a pivotal point for traders.

Tusar highlighted the benefits of trading with margin, noting that it provides customers with leverage and entry into the crypto market without requiring the same upfront investment as traditional spot trading. Derivatives also enable investors to manage risk related to their underlying crypto assets by engaging in long and short positions.

Coinbase’s customers will soon gain direct access to futures trading via Coinbase Financial Markets. In the previous year, Coinbase acquired FairX, now known as the Coinbase Derivatives Exchange, which operates as a CFTC-regulated futures exchange. This exchange, open to third-party brokers, FCMs, and market makers, has accumulated substantial liquidity, with significant volumes of BTC and ETH futures traded.

The recent regulatory approval for futures trading follows the introduction of new bitcoin and ether futures contracts by the Coinbase Derivatives Exchange, primarily targeted at institutional clients. The company introduced “nano” bitcoin and ether contracts earlier, responding to growing institutional demand for advanced derivatives products.

However, it’s important to note that Coinbase is currently facing a legal challenge from the U.S. Securities and Exchange Commission (SEC). The SEC filed a lawsuit in June, alleging that Coinbase operated as an unregistered exchange, broker, and clearing agency. In a show of support for Coinbase, a16z and Paradigm jointly filed an amicus brief, criticizing the SEC’s regulatory approach and its potential negative impact on blockchain technology development in the United States. In response, Coinbase filed a motion to dismiss the lawsuit, asserting that the SEC’s actions diverge significantly from established legal frameworks.