New Chapter in US Crypto Trading
Coinbase Global Inc., a major player in the crypto landscape, has been granted the authorization to offer cryptocurrency derivatives to American retail consumers.
A Long-Awaited Approval
Coinbase Financial Markets Inc., a child company of the foremost American crypto exchange, has successfully obtained the nod from the National Futures Association to run as a Futures Commission Merchant. This will facilitate the introduction of crypto futures to the public. Plans for the launch are already in motion and are set to be unveiled in the coming weeks, per inside sources.
Journey to Derivatives
The endeavor to launch derivatives isn’t a spur-of-the-moment decision for Coinbase. Almost two years prior, they sought the blessing of the NFA. Enhancing this vision, Coinbase acquired futures exchange FairX in 2022, which held its own registration with American regulatory authorities. Now renamed as Coinbase Derivatives Exchange, the platform had been redirecting traders to third-party vendors, like brokers, for futures acquisition. This recent approval, however, is a game-changer. Now, directly from the Coinbase primary application, users can avail these derivatives.
Expanding Horizons
Cryptocurrency derivatives have made a significant impact on centralized exchanges, contributing to 78.2% of their total crypto trading volume in the previous month, data from CCData highlights. The allure of these derivatives largely stems from the leverage they offer traders. While Coinbase has plans to introduce leverage, specifics are yet to be divulged.
It’s important to note that other US-based exchanges like CME and LedgerX are not strangers to offering crypto derivatives.
Navigating Regulatory Waters
Coinbase’s milestone coincides with its ongoing legal tussle with the US Securities and Exchange Commission (SEC). A lawsuit was slapped on Coinbase by the SEC in June this year for allegations around operation without the requisite registrations and the sale of unauthorized securities. Coinbase’s stance is that the regulatory body doesn’t create a conducive environment for compliance.
Coinbase’s Greg Tusar, leading the institutional products sector, expressed, “We’re committed to collaborating with regulators, given regulations are coherent and rational, to procure permissions to introduce products that resonate with our mission.”
Global Footprint
Coinbase isn’t limiting its derivatives vision to US soil. Earlier, in May, they launched the Coinbase International Exchange. This platform allows institutional entities from select international jurisdictions to venture into perpetual futures trading. As per their official website, in the past month alone, the International Exchange saw a trading volume of $2.52 billion.
Market Response
In the wake of this development, Coinbase’s shares witnessed a 3% surge during initial trading sessions. Notably, the stock’s value more than doubled in the current year, recovering from a drastic 86% drop in 2022.
