Coinbase Receives Approval to Offer Crypto Futures to U.S. Retail Customers
In a major regulatory victory, the National Futures Association (NFA) has granted permission to Coinbase, America’s largest digital asset exchange, to operate a Futures Commission Merchant (FCM) platform for U.S. retail customers. This approval comes amidst a heated battle between Coinbase and the U.S. Securities and Exchange Commission (SEC) over the registration of its offerings.
The approval is seen as a significant win for Coinbase and the crypto industry. Many commentators question why Coinbase was able to register with the Commodities Futures Trading Commission (CFTC) but has faced resistance from the SEC. Avichal Garg, the founder of investment management firm Electric Capital, expressed this sentiment in a tweet, stating that the approval from the CFTC is a significant achievement that requires years of work.
Brian Quintenz, former CFTC Commissioner and policy head at a16z, welcomed the approval, highlighting the importance of regulators engaging in constructive dialogues around new technology to benefit customers and innovation. Coinbase CEO Brian Armstrong also celebrated the approval, stating that it represents a major milestone for crypto clarity in the United States.
The approval places Coinbase in a position traditionally held by traditional finance firms. Currently, institutional exchanges such as the Chicago Mercantile Exchange and the Chicago Board Options Exchange offer Bitcoin and Ether futures in the U.S. Coinbase’s latest offering makes it the first crypto-native company to provide both traditional spot crypto trading and futures products directly.
The move allows Coinbase to tap into the massive global crypto derivatives market. CoinGecko reported that the market was valued at just under $3 trillion in May, with the majority of trading volumes coming from the derivatives market. Analyst Dan Dolev from Mizuho Securities noted that this approval expands Coinbase’s total addressable market, given the size and potential of the derivatives market.
Industry experts have expressed excitement about the potential of Coinbase’s new products. Jeff Sekinger from Orca Capital believes that Coinbase will become a crucial access point for traders, offering enhanced exposure and flexibility. Meltem Demirors, Chief Strategy Officer of CoinShares, sees it as an exciting time for U.S. crypto markets, particularly with a shift towards U.S. trading hours.
Coinbase initially announced plans to offer BTC and ETH futures contracts in mid-2022. The recent approval allows the exchange to offer crypto futures directly to eligible U.S. retail customers, expanding beyond institutional clients. The exact launch date for these products has not been specified.
Despite the positive news, Coinbase’s stock (COIN) did not react significantly to the announcement. The stock dropped 1.56% on the day, reaching $77.7 in after-hours trading. However, Coinbase shares have seen impressive growth, rising by 130% so far this year.
Coinbase’s approval to offer crypto futures to U.S. retail customers highlights the company’s regulatory progress and its expanding role in the crypto industry. The move opens up new opportunities for customers and signifies a growing acceptance of digital assets within the traditional financial system.