Coinbase Can Now Offer Bitcoin and Ethereum Futures in the US
Coinbase has won approval from the National Futures Association (NFA) to offer crypto futures to eligible US customers. This comes after the exchange applied with the NFA in September 2021 to register as a futures commission merchant (FCM), acting as a futures trading broker on its platform.
Coinbase Can Offer Bitcoin and Ethereum Futures
In a Wednesday blog post, Coinbase revealed that it had been granted permission to offer futures contracts in Bitcoin and Ethereum to eligible US customers. The platform said it will provide access to regulated derivatives products through Coinbase Financial Markets.
In the announcement, the largest US-based crypto exchange acknowledged the importance of offering access to a CFTC-regulated crypto derivatives market, claiming that it enables broader participation in the emerging crypto economy. It said:
“Access to a CFTC-regulated crypto derivatives market is essential to unlocking significant growth and enabling broader participation in the cryptoeconomy.”
Futures are contracts that allow traders to speculate on whether underlying asset prices, such as commodities or indices, will rise or fall. Traders are required to post cash collateral, known as margin, at an FCM to buy or sell futures.
According to Coinbase, the global crypto derivatives market currently represents approximately 75% of the overall trading volume in the crypto space and is a vital access point for traders.
The availability of margin trading enables customers to have leverage and exposure to the crypto market with less upfront capital than traditional spot trading. Investors also use derivatives to manage the risk associated with their underlying crypto assets.
Last year, Coinbase acquired FairX, now known as the Coinbase Derivatives Exchange, to offer derivative products. The exchange has successfully launched nano Bitcoin and Ethereum futures contracts, catering to retail and institutional investors.
The Coinbase Derivatives Exchange, open to third-party brokers, FCMs, and market makers, has already traded billions of dollars’ worth of futures contracts. “It has established a deep liquidity pool with $4.7bn BTC and $2.0bn ETH futures traded in notional volume so far in 2023,” the exchange said.
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Coinbase Pushes for Regulatory Clarity Amid SEC Crackdown
Back in June, the Securities and Exchange Commission sued both Binance, the world’s largest cryptocurrency exchange, and Coinbase, the largest US-based cryptocurrency. The regulator argued that both platforms operated as unregistered exchanges offered unregistered securities, and misled customers, among other things.
The complaints, notably the lawsuit against Coinbase, came as the exchange urged the SEC for clearer crypto regulation guidelines. Since last year, Coinbase has filed numerous petitions with the regulator to produce regulations explaining how securities laws apply to cryptocurrency.
More recently, Coinbase also launched a crypto advocacy group tasked with promoting the interests of the crypto community. Dubbed Stand with Crypto Alliance, the independent nonprofit organization aims to mobilize support for legislation that would create a regulatory framework for digital assets in the US.
“I think a few politicians are seeing crypto as an easy shot to take,” Faryar Shirzad, Coinbase’s chief policy officer, told CNN Business in a recent interview. “I don’t think they have fully understood the passion and the community behind it.”
Meanwhile, Coinbase shares have positively reacted to the news, gaining more than 5% in the pre-market trading. The uptick in Coinbase shares comes as the company’s stock finished its last trading day on Tuesday, down by more than 2%.
Do you think Coinbase could offer future contracts in more cryptocurrencies in the future? Let us know in the comments below.