- August 18, 2023
- Posted by: [email protected]
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Coinbase’s recent authorization to provide cryptocurrency futures to U.S. retail customers is being hailed as a significant regulatory triumph in the midst of a contentious struggle with the country’s securities regulator. On August 16th, the National Futures Association (NFA), recognized by the U.S. commodities regulator as a registered futures association, granted Coinbase the green light to operate a Futures Commission Merchant (FCM) platform.
This milestone is seen by many in the crypto industry as a remarkable regulatory victory for both Coinbase and the broader crypto ecosystem, particularly given the ongoing accusation by the U.S. Securities and Exchange Commission (SEC) that Coinbase has evaded the registration of its offerings. Avichal Garg, founder of investment management firm Electric Capital, questioned the SEC’s stance, highlighting Coinbase’s successful registration with the Commodity Futures Trading Commission (CFTC) in contrast to the SEC’s claims of non-compliance.
Former CFTC Commissioner Brian Quintenz, now associated with crypto investment firm a16z, emphasized the significance of regulatory openness to new technologies, noting that when regulators engage constructively with innovative technologies, both customers and innovation can thrive.
Coinbase CEO Brian Armstrong expressed that the approval marked a significant moment for achieving clarity in the U.S. crypto landscape. This move also positions Coinbase in a role typically dominated by traditional financial institutions. The Chicago Mercantile Exchange and the Chicago Board Options Exchange, established institutional exchanges, currently offer Bitcoin and Ethereum futures in the United States.
Coinbase hailed this development as a “critical milestone,” highlighting its status as the first crypto-native company to provide both traditional spot crypto trading and futures products directly. The company unveiled its plans to offer BTC and ETH futures contracts in mid-2022. This recent approval grants Coinbase the ability to extend crypto futures offerings directly to eligible U.S. retail customers, not just institutional clients. However, the exchange has not disclosed the exact timing of this rollout.
Industry experts view this expansion into futures as a strategic move to tap into the substantial crypto derivatives market, which was valued at nearly $3 trillion in May. Dan Dolev, an analyst at Mizuho Securities, emphasized that since the global crypto derivatives market can be several times larger than the spot market, this approval broadens Coinbase’s potential reach.
Despite the news, Coinbase’s stock (COIN) exhibited a slight drop of 1.56% on the day, reaching $77.7 in after-hours trading. Nonetheless, Coinbase shares have surged by 130% year-to-date, reflecting the company’s overall positive trajectory.
