Despite the ongoing battle between Coinbase and the SEC, the company managed to achieve a major milestone by entering the futures market.
Coinbase Financial Markets, Inc., part of the leading cryptocurrency exchange in the US, has finally gained regulatory approval to offer crypto futures trading to eligible customers within the country. This long-awaited permission marks a “watershed moment” for Coinbase, which has been reportedly awaiting the green light since 2021.
Under the approval of the National Futures Association (NFA), Coinbase is now an authorized futures commission merchant (FCM).
The NFA is a self-regulatory organization designated by the Commodity Futures Trading Commission (CFTC) to oversee the futures industry. Futures contracts are a type of financial derivative products that allow traders trade based on the future price of an underlying asset, offering potential opportunities for profit through both long and short positions.
Futures At Coinbase
Coinbase has been among the world’s first and largest firms in the crypto space. The exchange is no stranger to institutional investors; however, expanding its customer base across the US remains a significant challenge.
The approval allows the exchange to expand its offerings and potentially tap into a wider market of crypto enthusiasts and traders looking to participate in the dynamic world of futures trading.
Greg Tusar, Vice President and Institutional Product for Coinbase, said in the firm’s announcement post that the approval would bring “transparent and secure markets” to their customers. The company plans to provide further guides to accessing futures services for eligible US customers in the coming months.
The move comes at a time when Coinbase is navigating a complex legal landscape. The exchange is currently under regulatory pressure after being sued for operating an unregistered securities exchange by the Securities and Exchange Commission (SEC). A number of cryptocurrencies on Coinbase are additionally classified as securities.
Regulatory clarity remains a critical factor in ensuring the sector’s healthy growth. Coinbase CEO Brian Armstrong has repeatedly expressed his concerns over the US regulatory landscape surrounding cryptocurrencies. He has publicly shared his belief that the stringent regulatory climate could potentially drive the cryptocurrency industry offshore, seeking friendlier jurisdictions for growth and innovation.
A Bullish Signal?
Coinbase has recently been known for its newly launched layer-2 scaling solution Base. Apart from that, the exchange made its name by being involved in the recent filings for spot Bitcoin ETFs by Wall Street giants.
Recent reports indicate that the Securities and Exchange Commission (SEC) is likely to postpone its decision on approving Bitcoin ETFs until early 2024. Given the SEC’s history of rejecting spot Bitcoin ETF proposals, hopes for approval have been low.
However, a glimmer of possibility emerges – speculation suggests that approval might be within reach if applicants establish a custody-sharing agreement.
This speculation is based on the fact that the SEC has previously expressed concerns about the potential for market manipulation. A custody-sharing agreement would allow the ETF to hold Bitcoin on behalf of investors, which could help mitigate these concerns.
Coinbase’s approval could positively impact Bitcoin ETF approval in several key ways. The endorsement by the NFA indicates a readiness to regulate crypto products, potentially boosting the SEC confidence in approving Bitcoin ETFs. This regulatory precedent may ease concerns over associated risks.
The approval development underscores strong demand for crypto futures trading. The SEC may want to consider the industry’s overall health and its potential for future growth in order to provide the ruling.
Lastly, the approval’s ripple effect could pave the way for increased institutional investment in the cryptocurrency sector. Should institutional investors gain access to trade crypto futures, the path to more substantial investment in Bitcoin, the underlying asset, could open up.