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Coinbase, the top-tier cryptocurrency exchange in the U.S., has rolled out a new trading avenue for its users. Significantly, this move enables eligible retail customers in the country to trade in crypto futures. Moreover, to cater specifically to this demographic, Coinbase has sized these futures contracts at 1/100th of a Bitcoin and 1/10th of an Ethereum. Consequently, this initiative not only broadens the spectrum of trading options available but also invites a broader range of participants to the crypto market.
Additionally, this move by Coinbase is familiar to those in the know. In August, the company successfully acquired approval from the National Futures Association. Hence, they are fully compliant to operate as a futures commission merchant. This strategic direction aligns with the global trend, where crypto derivatives command a staggering 75% of the global crypto trading volume.
Coinbase Futures Settled in U.S. Dollars
While the allure of futures trading is undeniable, Coinbase quickly reminds its users about the associated risks. Trading with leverage, although promising substantial returns, can also lead to losses exceeding the initial investment. Hence, it’s a tool that can either amplify gains or magnify losses. Additionally, for clarity, Coinbase confirmed that all futures contracts will be settled in U.S. dollars.
However, it’s more than just the retail crowd that the crypto exchange is eyeing. Last year, after the strategic acquisition of FairX, a CFTC-regulated futures exchange, the company launched the Coinbase Derivatives Exchange. This new platform, open to a broader range of market players like third-party brokers and market makers, released new bitcoin and ether futures contracts. But these were tailored specifically for their institutional clientele.
SEC Challenges Coinbase’s Expansion Efforts
Coinbase’s expansion endeavors have been challenging. The Securities and Exchange Commission (SEC) has been a significant roadblock in their path. The SEC, earlier this year, brought charges against Coinbase for not registering appropriately. However, Coinbase rebuts these claims, asserting that the SEC’s jurisdiction is limited to securities transactions.
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