Coinbase Global, a leading cryptocurrency exchange, has been granted regulatory approval by the National Futures Association (NFA) to offer regulated crypto futures to retail customers in the United States. This milestone comes at a time when Coinbase is under scrutiny due to a lawsuit filed by the Securities and Exchange Commission (SEC) alleging that the company is operating as an unregistered securities exchange, broker, and clearing agency.
The lawsuit filed by the SEC will focus on determining whether certain cryptocurrencies should be considered securities or commodities in the US. Despite this ongoing legal battle, Coinbase’s stock has surged by 123% year to date, indicating investor confidence in the company’s future prospects.
Coinbase had sought approval to offer regulated crypto products shortly after its initial public offering (IPO) two years ago and made a significant move in 2022 by acquiring the CFTC-regulated futures exchange FairX. The exchange has already launched trading in bitcoin and ether futures for institutional investors and plans to establish a separate derivatives platform for non-US citizens.
The NFA’s approval for regulated crypto futures is seen as a significant milestone in bringing federal regulatory oversight to the cryptocurrency markets. It signifies a step towards legitimizing and regulating the crypto industry, which has long been associated with uncertainty and volatility.
In the coming months, Coinbase plans to provide US customers with more information on accessing its futures products. These derivatives products allow investors to trade with less upfront investment and take long or short positions on a cryptocurrency’s performance.
The global crypto derivatives market represents approximately 75% of crypto trading volume worldwide, highlighting the immense potential for growth in this sector. However, Coinbase faces stiff competition from offshore exchanges like Binance and FTX, which offer not only traditional futures but also popular perpetual futures and options trading.
As Coinbase expands its offerings and navigates the legal challenges it is currently facing, its entry into the regulated crypto futures market is expected to attract more investors and bring further credibility to the cryptocurrency industry. With increased regulatory oversight, investors can have more confidence in the integrity of the market, which may help drive mainstream adoption of cryptocurrencies.
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