Coinbase announced Wednesday it had won regulatory approval to offer cryptocurrency futures to U.S. retail customers.
The approval came from the National Futures Association (NFA), an independent body registered under the Commodity Futures Trading Commission (CFTC). This allows Coinbase to offer crypto futures alongside traditional spot crypto trading directly to retail investors. The company is the first-ever crypto-native entity to do so.
This approval allows Coinbase to provide eligible U.S.-based investors access to the crypto derivatives market, which is largely untapped. The global crypto derivatives market is a major driver of volatility in the broader crypto market. In July, the total trading volume of crypto derivatives was about $1.85 trillion, accounting for almost 80 percent of the entire crypto market.
Previously, only institutional clients, such as hedge funds and investment banks, were allowed to trade crypto futures.
“This is a significant milestone for bringing federal regulatory oversight over the crypto markets,” said Faryar Shirzad, chief policy officer at Coinbase. “Under the supervision of the CFTC and NFA, Coinbase will be able to offer regulated futures in a manner that protects consumers and helps ensure that the U.S. remains a center for digital innovation.”
Coinbase announced the news on X (formerly Twitter) and its website. In a post, the company said it had been allowed to offer Bitcoin and Ether futures contracts. Futures contracts are agreements to trade an asset at a future date at a predetermined price.
After the news broke out, Coinbase’s stock price rose three percent to $81.55 in pre-market trading. However, the stock later fell back to trade 1.4 percent lower.
The regulatory approval comes as the company battles a lawsuit from the Securities and Exchange Commission (SEC).
In June, the SEC filed lawsuits against Binance and Coinbase, alleging that the two cryptocurrency exchanges were operating as securities exchanges without registering with the agency. Coinbase has denied all charges.
Coinbase has openly criticized the SEC for its hostile regulatory approach. Along with other crypto firms, Coinbase has repeatedly warned that the regulatory body is pushing crypto innovation and jobs overseas. CEO Brian Armstrong said the SEC Chair Gary Gensler’s enforcement-first approach could hinder innovation in the industry within the country.
“Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America,” said Armstrong in a tweet.
The crypto company also briefly discussed its ongoing suit with the SEC in a blog post. It said that where regulations are clear and sensible, they would work with regulators to receive the authorizations needed to offer products that align with their purpose.
Coinfund president Christopher Perkins, who is also the former head of OTC clearing at Citigroup, agreed that the NFA approval was “a big deal.”
Perkins noted that the post-2008 financial crisis rules enabled only a few brokers to take the role of a futures commission merchant (FCM). This made the industry less profitable and concentrated. He also pointed out that traditional markets’ infrastructure cannot keep up with the speed and volatility of crypto markets.
Perkins said that the crypto industry ad issues with counterparty risk, citing FTX and Celsius as examples. He said it was a “huge win” for a company like Coinbase to enter the “void” and provide a more secure platform for trading crypto derivatives.
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