Key Takeaways
- • Coinbase Financial Markets, Inc. (CFM) has secured Futures Commission Merchant (FCM) approval, allowing eligible US customers to access CFTC-regulated crypto derivatives products, subject to oversight by the CFTC and the National Futures Association (NFA).
- • CFM first applied to register as an FCM with the NFA in September 2021, and the company says it has worked with regulators since then to meet CFTC customer protection requirements.
- • Coinbase says the global crypto derivatives market accounts for roughly 75% of worldwide crypto trading volume, and Coinbase Derivatives Exchange (formerly FairX, acquired in 2022) reported $4.7bn in BTC and $2.0bn in ETH futures notional volume so far in 2023.
- • Coinbase will provide further details in the coming months on how verified US customers can access its futures offering.
Summary
Coinbase Financial Markets, Inc. has received Futures Commission Merchant (FCM) approval, according to a Coinbase blog post dated August 2023, enabling eligible US customers to access regulated crypto derivatives through the entity. The access is subject to the oversight of the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). Coinbase said customers will soon be able to access futures directly through Coinbase Financial Markets, and that additional information on how verified US customers can participate will follow in the coming months.
Coinbase Financial Markets filed its application to register as an FCM with the NFA in September 2021. The company said it has since worked with regulators to ensure compliance with applicable rules and to confirm that its FCM business model meets CFTC customer protection requirements. Coinbase described the approval as a "watershed moment" for bringing regulated crypto derivatives products to US customers.
The company framed derivatives as a critical access point, noting that the global crypto derivatives market represents about 75% of worldwide crypto trading volume. Coinbase noted that margin trading offers leverage and lower upfront investment, which it acknowledged may risk loss, and that long and short positions allow investors to manage risk on underlying crypto holdings. Coinbase Global, Inc. acquired FairX in 2022, a CFTC-regulated futures exchange now known as Coinbase Derivatives Exchange. The exchange has launched nano Bitcoin and Ethereum futures for retail investors and, on June 5, larger contracts for institutional clients. It is open to third-party brokers, FCMs, and market makers, and has recorded $4.7bn in BTC and $2.0bn in ETH futures notional volume so far in 2023.
The blog post was updated on August 17, 2023 to clarify the roles of Coinbase Global, Inc. entities, including Coinbase Financial Markets and Coinbase Derivatives Exchange. Coinbase noted that spot accounts are maintained by Coinbase Inc., which is not CFTC registered, and that the NFA does not have oversight authority over spot virtual currency products, transactions, exchanges, custodians, or markets. The company also stated that futures trading may not be suitable for everyone and that the risk of loss can be substantial.
Coinbase Financial Markets filed its application to register as an FCM with the NFA in September 2021. The company said it has since worked with regulators to ensure compliance with applicable rules and to confirm that its FCM business model meets CFTC customer protection requirements. Coinbase described the approval as a "watershed moment" for bringing regulated crypto derivatives products to US customers.
The company framed derivatives as a critical access point, noting that the global crypto derivatives market represents about 75% of worldwide crypto trading volume. Coinbase noted that margin trading offers leverage and lower upfront investment, which it acknowledged may risk loss, and that long and short positions allow investors to manage risk on underlying crypto holdings. Coinbase Global, Inc. acquired FairX in 2022, a CFTC-regulated futures exchange now known as Coinbase Derivatives Exchange. The exchange has launched nano Bitcoin and Ethereum futures for retail investors and, on June 5, larger contracts for institutional clients. It is open to third-party brokers, FCMs, and market makers, and has recorded $4.7bn in BTC and $2.0bn in ETH futures notional volume so far in 2023.
The blog post was updated on August 17, 2023 to clarify the roles of Coinbase Global, Inc. entities, including Coinbase Financial Markets and Coinbase Derivatives Exchange. Coinbase noted that spot accounts are maintained by Coinbase Inc., which is not CFTC registered, and that the NFA does not have oversight authority over spot virtual currency products, transactions, exchanges, custodians, or markets. The company also stated that futures trading may not be suitable for everyone and that the risk of loss can be substantial.
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