Coinbase has achieved a notable regulatory milestone by securing approval to offer cryptocurrency futures trading services to eligible consumers. This development comes as Coinbase Financial Markets Inc., a company division, announced its authorization by the National Futures Association (NFA), a self-regulatory body designated by the Commodity Futures Trading Commission (CFTC).
Greg Tusar, Vice President of Institutional Products at Coinbase, expressed the significance of this achievement, underlining that Coinbase is the pioneer in offering both conventional spot cryptocurrency trading and regulated leveraged crypto futures for verified users.
The move is particularly timely as the global cryptocurrency derivatives market expands. According to Tusar, crypto derivatives now account for over 75% of worldwide crypto trading activity, which is crucial in attracting traders. These derivatives, which encompass margin trading, allowing users to enter the crypto market with less capital than traditional trading, offer a way for investors to manage risk effectively.
Tusar further explained the advantages of derivatives, emphasizing that “Investors use derivatives to manage risk on their underlying crypto assets because they allow them to express long and short positions.”
Coinbase’s customers are poised to directly access futures trading through Coinbase Financial Markets directly, enabling them to engage with a broader range of financial instruments, potentially enhancing their returns.
However, Coinbase hasn’t been without its regulatory hurdles. In June, the Securities and Exchange Commission (SEC) filed a lawsuit against the company for alleged operation as an unregistered exchange, broker, and clearing agency.
In a swift response, Coinbase moved to dismiss the lawsuit, asserting that the SEC’s approach deviated significantly from existing legal frameworks.
Backing Coinbase’s stance, Paradigm and Andreessen Horowitz (a16z) recently submitted an amicus brief in the company’s favor, expressing unease about the SEC’s actions and highlighting potential threats to blockchain technology’s development.
The NFA’s approval is a significant leap for Coinbase and the broader cryptocurrency realm. By greenlighting crypto futures trading, regulators acknowledge the growing role of digital assets in the financial domain. This endorsement could draw more institutional investors and traders to the crypto sector, further cementing its status as a legitimate investment avenue.
Moreover, this move could bolster Coinbase’s revenues, allowing it to tap into the expanding derivatives market. Additionally, it may prompt other cryptocurrency exchanges to pursue comparable endorsements, thereby diversifying options for traders and investors.
Coinbase’s successful registration as an FCM signifies a noteworthy milestone, expanding its capabilities and potentially amplifying gains for its customers. This advancement contributes to the sector’s legitimacy and recognition as the cryptocurrency landscape evolves.