Coinbase secures regulatory nod for futures trading

Coinbase Financial Markets has achieved a significant milestone by receiving regulatory clearance from the National Futures Association (NFA), a CFTC-designated self-regulatory body.

This approval allows them to function as a Futures Commission Merchant (FCM) and extend their crypto futures offering to eligible US customers via their platforms.

This accomplishment reinforces Coinbase’s dedication to maintaining a business that complies with all regulations and showcases their ambition to be the foremost secure and trusted crypto-native platform for their clientele.

Now, Coinbase stands out as the premier crypto-native entity to proffer traditional spot crypto trading hand-in-hand with regulated and leveraged crypto futures, seamlessly on a consolidated trading solution for its verified user base.

Coinbase always emphasises the importance of regulation and transparency, seeing them as foundational pillars that enhance trust for individual and institutional investors alike. Gaining access to a CFTC-regulated crypto derivatives market is pivotal for driving substantial growth and expanding the footprint of participation within the cryptoeconomy.

Their commitment to compliance is evident from their actions in September 2021, when they initiated the application process with the NFA to register as an FCM. Since then, their collaboration with regulators has been relentless, ensuring strict adherence to all required guidelines and fortifying their FCM business model to be in line with the CFTC’s customer protection criteria. Their decision to go public in the US stemmed from their belief in the US’s potential to foster the cryptoeconomy, coupled with its stringent consumer protection norms.

Coinbase views this as a defining moment, highlighting their ability to roll out regulated crypto solutions to US clients. Their ethos revolves around operating in jurisdictions with clear, pragmatic regulations, partnering with regulatory authorities to secure necessary permissions. This approach underpins their mission of leveraging crypto to revamp the financial framework, pushing the boundaries of economic freedom and opportunities.

The latest update is the final seal of approval, allowing eligible US patrons to avail regulated derivative products via Coinbase Financial Markets, bridging it with their spot market offerings. This initiative, supervised by the CFTC and NFA, paves the way for a broader populace to delve into the US cryptoeconomy in a safe environment, reinforcing the nation’s stance as a digital innovation hub.

An analysis reveals that the global crypto derivatives segment constitutes approximately 75% of the worldwide crypto trading volume, a testament to its significance. Derivatives offer the advantage of trading on margin, demanding less initial investment compared to conventional spot trading, while allowing investors to hedge risks associated with crypto assets.

This perceived benefit was the driving force behind Coinbase’s acquisition of FairX in 2022, now rebranded as the Coinbase Derivatives Exchange. Since its inception, the exchange has unveiled nano Bitcoin and Ethereum futures contracts tailored for retail investors. On June 5, they expanded their portfolio catering to the institutional segment. With a robust liquidity pool of $4.7bn BTC and $2.0bn ETH futures traded in 2023, this platform welcomes third-party brokers, FCMs, and market makers.

Having the FCM approval propels Coinbase closer to their objective of offering these transparent, secure markets to their patrons. Over the forthcoming months, further details on accessing these futures will be unveiled for their verified US clientele.

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