Coinbase’s Futures Triumph: A Turning Point for Crypto Regulation?

Coinbase takes another step toward operating a fully compliant exchange following regulatory approval of its futures trading application.

Brian Armstrong Celebrates a Coinbase victory with lots of balloons.
Created by Gabor Kovacs from DailyCoin
  • Coinbase gains landmark approval to offer regulated futures trading.
  • The approval potentially signals a softening of the heavy-handed approach taken by US regulators.
  • Eligible US customers have access to a broader range of investment opportunities.

Following recent regulatory enforcement actions, the US crypto industry faces deep uncertainty. However, against this tide of sentiment, the National Futures Association (NFA), a Commodity Futures Trading Commission (CFTC) designated self-regulatory organization, has approved futures trading on the Coinbase platform.

Futures refer to derivatives contracts between two parties who bet on the future direction of an asset, often with leverage. This process enables exposure to the asset without purchasing or owning the asset in question. 

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A recent report from CoinGecko showed that derivatives accounted for $3 trillion, or 74.8% of the total crypto trading volume for March 2023. Centralized and decentralized exchanges comprised the remaining balance at 22.8% and 2.4%, respectively.

Coinbase Secures Regulatory Approval for Futures Offerings

Coinbase’s Vice President of Institutional Product Greg Tusar said winning regulatory futures approval marked a significant milestone in the drive to operate a regulated and compliant business – critical for building crypto confidence and broadening participation.

The approval represents a boon for Coinbase, which is now rubberstamped to enter the lucrative crypto derivatives market. 

The firm added that it would work with regulators “to update the financial system to advance economic freedom and opportunity” where the regulations are clear and sensible about the ongoing issues with US regulators.

Regulatory Challenges

A spate of recent regulatory enforcement actions at the hands of the Securities Exchange Commission (SEC) and the CFTC, among others, has led some to believe that authorities are waging war on crypto.

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Coinbase has not been immune to the blowback, with the SEC filing against the company in June on allegations that include offering unregistered securities and operating an unregistered exchange.

Following the Coinbase filing, SEC Chair Gary Gensler told CNBC that clarity exists and crypto firms are not exempt from following the rules.

“I think there’s been clarity for years. The investing public has the benefit of the US securities laws, crypto should be no different, and these platforms, these intermediaries need to come into compliance and protect the investing public.”- Gensler said.

On the Flipside

  • Coinbase’s approval for futures products could encourage the general public to engage in risky leveraged trading.
  • There are concerns that futures markets may increase crypto price volatility.

Why This Matters

Considering its ongoing legal fight with the SEC, Coinbase’s regulatory futures trading approval was a surprising move. However, despite this, the approval may demonstrate that authorities are softening their approach to crypto regulation.  

Find out what Paul Grewal thinks about Gary Gensler’s take on clear rules:

Coinbase’s Legal Chief Slams SEC’s Lack of Guidance for Crypto Firms

Discover the latest on the SEC vs. Ripple lawsuit:

Anonymous Banker Rejoins SEC vs. Ripple Labs Legal Battle: Who Could It Be?

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Samuel Wan

Samuel Wan is a finance professional turned crypto journalist, known for his insightful reporting on market trends, regulatory changes, and technological developments within the digital asset industry. His ability to simplify complex concepts and report the facts has made him a trusted source in the crypto community. Beyond his writing, Samuel is an active mountain biker and gamer.