Coinbase, the titan of cryptocurrency exchanges in the U.S., has just made a groundbreaking announcement. They’ve secured the much-coveted regulatory nod to roll out crypto futures trading services to their eligible clientele in the U.S.
This monumental approval comes from the National Futures Association, a self-regulatory body sanctioned by the Commodity Futures Trading Commission. This means Coinbase can now function as a futures commission merchant (FCM) and offer its U.S. customers a taste of crypto futures via its platforms.
Greg Tusar, the VP of Institutional Product at Coinbase, couldn’t contain his excitement. In his shared statement, he dubbed this approval a “critical milestone.” He highlighted that Coinbase is the “first crypto-native leader” to offer traditional spot crypto trading and regulated, leveraged crypto futures to its verified customer base. If we rewind to September 2021, we will find Coinbase filing an application with the NFA to register as an FCM. Fast forward to today, and they’ve made it!
Tusar shed light on the global crypto derivatives market, emphasizing its magnitude. It accounts for a whopping 75% of the global crypto trading volume. This is a pivotal access point for traders. He explained the allure of trading with margin, which offers customers the leverage to delve into the crypto market with a smaller initial investment than traditional spot trading. This also empowers investors to manage risks associated with their core crypto assets.
But wait, there’s more! Coinbase clients will soon be privileged to directly access futures via Coinbase Financial Markets. Last year, Coinbase strategically acquired FairX, a CFTC-regulated futures exchange. It’s now rebranded as the Coinbase Derivatives Exchange. This platform is open to third-party brokers, FCMs, and market makers. It boasts a deep liquidity pool, with a staggering $4.7 billion in BTC and $2 billion in ETH futures traded in terms of notional volume this year alone.
However, it’s not all sunshine and rainbows for Coinbase. They’re embroiled in a legal tussle with the U.S. Securities and Exchange Commission. The SEC has slapped a lawsuit against Coinbase, accusing them of functioning as an unregistered exchange, broker, and clearing agency. But Coinbase isn’t alone in this battle. Heavyweights like Andreessen Horowitz (a16z) and Paradigm have stepped in, filing a joint amicus brief supporting Coinbase.
