Coinbase is now able to offer retail customers crypto futures in the US. This approval comes as the cryptocurrency exchange is being sued by authorities who claim it violated securities laws.
The company announced on Wednesday that National Futures Association (NFA), a self-regulatory organization for the US derivatives sector, had granted permission to small investors for them to trade futures contracts on tokens like bitcoin on their market.
It is also a rare victory for the San Francisco group, which has spent most of this year a data clashing with American regulat. This is a rare win for the San Francisco-based group that has spent most of the year fighting with American regulators.
The Securities and Exchange Commission (SEC) charged Coinbase in June with operating an unregistered clearing agency, national securities exchange and broker. Coinbase has denied the charges, and said that it will contest the case.
This is the first time that a crypto group was designated as a Futures Commission Merchant, or FCM. It also puts the company into competition with traditional brokers of futures, like Interactive Brokers. Previously, the exchange only allowed institutional investors to trade futures.
Christopher Perkins, former head of OTC Clearing at Citigroup and president of cryptocurrency investment firm Coinfund, called the NFA’s approval “a big deal”.
He noted that fewer brokers were able to take on the role as an FCM, because the rules enacted after the 2008 crisis made the industry less lucrative and concentrated it into the hands of only a few large banks. The traditional market infrastructure was unable to keep up with the volatility and speed of crypto markets.
Perkins stated that “this has left crypto market players in a difficult situation — unable access derivative markets in order to hedge their risk, particularly in a manner which segregates and safeguards their collateral.”
“We’ve had problems with counterparty risks with FTX and Celsius, as we’ve seen with crypto. . . “For someone like Coinbase, to step in the void is a huge victory,” he said.
Nearly three quarters of the daily trading volume on crypto markets is accounted for by derivatives markets. According to CCData, around $2bn worth of deals are traded every day. Although CME Group, a US-based regulated exchange, offers crypto futures it only has 2% of the market. The majority of transactions take place at overseas exchanges like OKX and Huobi.
Greg Tusar said, “This is an important milestone that reaffirms the commitment of Coinbase to run a compliant and regulated business.”
Coinbase defends its staking activity against several state regulators in the United States, some of whom have issued orders to cease and desist.
Staking is a method where users lock their crypto assets in a crypto exchange wallet and give the exchange permission to stake them on other crypto projects which offer yield or interest.