By
Steve Muchoki
April 26th, 2024
With the approval, Coinbase has become the first native crypto company to provide both derivatives and spot trading services directly to customers.
Leading American crypto exchange Coinbase has received regulatory approval to offer eligible customers in the United States the opportunity to trade Bitcoin (BTC) and Ethereum (ETH) futures contracts. The company will serve as a Futures Commission Merchant (FCM), a type of derivatives exchange controlled by the National Futures Association (NFA).
NFA is a self-regulatory organization under the Commodities Futures Trading Commission (CFTC). The group is tasked with overseeing the country’s derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency, and OTC derivatives.
First Crypto Native to Offer Both Spot and Futures Trading
Coinbase said in a blog post on 16 August that the NFA approved the license, allowing it to engage with futures trading officially. According to the company, the FCM application was submitted to regulators in September 2021. After two years of deliberations, the firm has finally been greenlighted to offer a derivatives exchange alongside its spot trading options.
With the approval, Coinbase has become the first native crypto company to provide both derivatives and spot trading services directly to customers.
“Coinbase will now be the first crypto-native leader to directly offer traditional spot crypto trading alongside regulated and leveraged crypto futures on an integrated trading solution for our verified customers,” the company said.
The exchange described its latest achievement as a “critical milestone”, noting that it had passed through stringent requirements to obtain the approval.
While Coinbase’s customers will soon be able to access futures trading directly through its platform, the company has already laid the groundwork for its derivatives offering. Last year, the exchange acquired FairX, which now operates as the Coinbase Derivatives Exchange.
The platform is open to third-party brokers, FCMs, and market makers, and it has accumulated substantial liquidity, facilitating notable trading volumes in BTC and ETH futures.
In June, Coinbase announced its intentions to launch BTC and ETH futures trading specially designed for institutional investors. Before that, the company said it was considering launching a derivatives platform in Bermuda.
75% of Crypto Trading Volume Comes from Derivatives Market
Coinbase also said in its blog post that a large chunk, approximately 75%, of the entire crypto trading volume is generated within the derivatives market worldwide. The company also claimed that “margin” trading gives customers an edge over the market compared to those trading spot options.
“The global crypto derivatives market represents ~75% of crypto trading volumes worldwide and is a critical trader access point. The ability to trade using margins gives customers leverage and access to the crypto market with less upfront investment than traditional spot trading.”
Meanwhile, it is worth noting that Coinbase’s regulatory milestone comes at a time when the exchange is also dealing with legal challenges. The US Securities and Exchange Commission (SEC) filed a lawsuit against the company in June, alleging that it operated as an unregistered exchange in the country.
