The cryptocurrency exchange seeks to join the National Futures Association, a self-regulating group for derivatives trading.
Coinbase introduced today that it has filed with the Nationwide Futures Affiliation to change into a registered futures fee service provider.
This means the exchange is in search of to move past mere spot trading—one asset for another—to the profitable enterprise of derivatives trading, in which people can wager on future prices.
Typical derivatives embrace futures and choices contracts. Futures allow people to buy and sell contracts that set up the price of Bitcoin or another cryptocurrency on a particular date in the future. Suppose the worth goes down? You’ll be able to attempt to promote it for the next price and pocket the distinction. Options contracts work equally, however permit merchants the option to purchase or promote at a predetermined price. Perpetual contracts—futures that don’t expire—are another popular iteration.
Within the U.S., any business seeking to promote people should register with the Commodity Futures Trading Commission, the federal regulator of not just commodities however all derivative merchandise. However to take action, they have to usually first be members of the NFA, which handles the registration process on the agency’s behalf.
Derivatives trading is massive enterprise in conventional financial markets—and in cryptocurrency. Futures quantity on Binance dwarfs the quantity on its standard exchange by a factor of 3 to 1. The disparity is even bigger on FTX, the global exchange that’s making a big promoting push in the U.S. (where its smaller American affiliate can also be in search of to offer derivatives trading).
Coinbase has watched as these and different competitors (including largely unregulated Deribit) have created a virtually $150 billion market for crypto derivatives, according to current data from CoinGecko. Whereas it might be king of the American spot exchanges, it is determined it can’t proceed ceding exotic territory to its rivals.