Coinbase, the largest cryptocurrency exchange in the United States, has received regulatory clearance from the National Futures Association (NFA) to provide cryptocurrency futures trading to eligible customers. The NFA, a self-regulatory organization sanctioned by the Commodity Futures Trading Commission (CFTC), granted approval to Coinbase Financial Markets Inc. This development allows Coinbase to function as a futures commission merchant (FCM), enabling it to extend regulated crypto futures access to eligible customers across its platforms.
Greg Tusar, Coinbase’s Vice President of Institutional Product, emphasized the significance of this approval, terming it a “critical milestone.” He highlighted Coinbase’s distinctive position as the “first crypto-native leader” capable of directly offering both conventional spot crypto trading and regulated, leveraged crypto futures to verified customers.
The global cryptocurrency derivatives market accounts for approximately 75% of the total crypto trading volume globally, making it a pivotal entry point for traders. Tusar noted that trading with margin grants customers leverage and entry into the crypto market with comparatively lower upfront investments compared to traditional spot trading. Moreover, derivatives play a crucial role in helping investors manage risks associated with their underlying crypto assets.
Coinbase’s strategic acquisitions include the CFTC-regulated futures exchange FairX, now rebranded as the Coinbase Derivatives Exchange. Open to third-party brokers, FCMs, and market makers, this exchange has established a robust liquidity pool, boasting notable notional trading volumes. In 2021 alone, the exchange witnessed trades of $4.7 billion worth of Bitcoin (BTC) futures and $2 billion worth of Ethereum (ETH) futures.
However, amidst these achievements, Coinbase is facing legal challenges within the U.S. The company is currently entangled in a lawsuit with the Securities and Exchange Commission (SEC), accused of functioning as an unregistered exchange, broker, and clearing agency. In a show of support for Coinbase, venture capital firms Andreessen Horowitz (a16z) and Paradigm jointly submitted an amicus brief. They argue that the SEC’s regulatory approach poses a threat to the growth and development of blockchain technology in the United States.
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