Coinbase obtains regulatory approval to offer crypto futures trading to eligible clients

Quick Take

  • Coinbase is now allowed to operate as a futures commission merchant and offer eligible U.S. customers access to crypto futures from its platforms, the company said.

Coinbase, the largest cryptocurrency exchange in the U.S., has obtained regulatory approval to offer crypto futures trading services to eligible customers in the U.S., the company said today.

Coinbase Financial Markets Inc. said that it has secured regulatory approval from the National Futures Association, a self-regulatory organization designated by the Commodity Futures Trading Commission, to operate as a futures commission merchant (FCM) and offer eligible U.S. customers access to crypto futures from its platforms.

In a statement shared with The Block, Greg Tusar, Coinbase’s vice president of institutional product, called the approval a “critical milestone” and said that the exchange is the “first crypto-native leader” to directly offer traditional spot crypto trading alongside regulated and leveraged crypto futures for verified customers.

In September 2021, the company filed an application with the NFA to register an FCM. Tusar said that the global crypto derivatives market represents roughly 75% of crypto trading volume worldwide and is a critical trader access point. 

“The ability to trade using margin gives customers leverage and access to the crypto market with less upfront investment than traditional spot trading. Being able to express long and short positions, investors also use derivatives to manage risk on their underlying crypto assets,” Tusar added.

Coinbase said its customers will soon be able to directly access futures through Coinbase Financial Markets.

Derivatives exchange

Last year, Coinbase acquired FairX, a CFTC-regulated futures exchange currently known as the Coinbase Derivatives Exchange. The Coinbase Derivatives Exchange is open to third-party brokers, FCMs and market makers, and it has established a deep liquidity pool with $4.7 billion worth of BTC and $2 billion worth of ETH futures traded in notional volume so far this year, according to Tusar.

The latest regulatory approval for futures trading comes after the Coinbase Derivatives Exchange in June launched new bitcoin and ether futures contracts aimed at institutional clients. Last year, the derivatives exchange introduced its “nano” bitcoin and ether contracts, as the company said it had seen institutional demand for advanced derivatives products.

SEC lawsuit

Coinbase is currently facing legal trouble in the U.S., with the Securities and Exchange Commission suing the company in June for allegedly operating as an unregistered exchange, broker and clearing agency.

Last week, Andreessen Horowitz, also known as a16z, and Paradigm filed a joint amicus brief in support of Coinbase. The firms said in the filing, “The SEC’s regulatory overreach, coupled with the unpredictability and arbitrariness of its actions, threatens the development of blockchain technology in the United States.”

In late June, Coinbase filed a motion to dismiss the lawsuit, arguing that the SEC’s approach significantly deviates from existing legal frameworks.

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