Coinbase ready to launch crypto derivatives and futures
Coinbase ready to launch crypto derivatives and futures
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Coinbase ready to launch crypto derivatives and futures

By Eleonora Spagnolo - 16 Sep 2021

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Coinbase is ready to enter the crypto derivatives and futures sector.

According to Bloomberg, the exchange has submitted the application to the National Futures Association.

Coinbase enters the crypto derivatives and futures sector

The largest exchange in the United States is trying to expand its services. Until now, Coinbase has never offered this type of product, although its competitors (including Binance) have been active in this area for some time. 

An expanding market

After all, it was difficult to sit back and watch. The crypto derivatives sector is growing in volume.

In 2020, derivatives trading often surpassed trading on the so-called spot markets.  

The reasons for this growth are certainly related to the pandemic: in 2020, many people decided to try their luck by investing in crypto trading and derivatives. Secondly, the volatility of cryptocurrencies appeared as a synonym for strong gains, so much so that even institutions and hedge funds invested in derivatives. In addition, price fluctuations allow savvy operators to trade even when there are drops in progress

In 2021, this trend repeated itself. In July, following a market crash, derivatives trading overtook the spot market. The former reached volumes of $3.2 trillion, compared with $2.7 trillion in the “traditional” market.

Industry leaders

According to CoinMarketCap data, the industry leader in the derivatives market is Binance, which in the last 24 hours has reported volumes of $61 billion.

OKEx is close behind with volumes of $15 billion, followed by Huobi Global and FTX at $13 billion. 

SEC is ready to sue Coinbase

Coinbase has to deal with the SEC

By entering the futures and derivatives sector, Brian Armstrong’s company is trying not to lose its leadership. But it will have to reckon with the SEC and the US authorities, which lately are not at all benevolent when it comes to cryptocurrencies. 

In recent days, Coinbase itself announced that the SEC is planning to sue it for the launch of its Coinbase Lend product. 

According to Coinbase itself, they had been applying for six months to launch this product, which was supposed to allow consumers to earn interest on certain coins, including USDC. Even though Coinbase had the option of launching without permission, it decided to consult the SEC. 

A battle ensued, and although Coinbase provided all the explanations requested, the SEC remained sceptical, even asking for the names of all those who had signed up for Lend’s pre-launch. The exchange did not want to provide this information. 

The Controversy

Coinbase complains that it has not received sufficient explanation from the SEC, which has limited itself to “threatening” not to launch Lend or there would be legal consequences. 

Therefore, Coinbase stated with disappointment: 

“The SEC has repeatedly asked our industry to “talk to us, come in.” We did that here. But today all we know is that we can either keep Lend off the market indefinitely without knowing why or we can be sued. A healthy regulatory relationship should never leave the industry in that kind of bind without explanation. Dialogue is at the heart of good regulation.

The net result of all this is that we will not be launching Lend until at least October. Coinbase continues to welcome additional regulatory clarity; mystery and ambiguity only serve to unnecessarily stifle new products that customers want and that Coinbase and others can safely deliver”.

In other words, it is a full-on conflict. With these assumptions, the risk is that the other products that Coinbase wants to launch will also encounter similar difficulties. 

And this is not good at all. 

 

Eleonora Spagnolo

Journalist passionate about the web and the digital world. She graduated with honours in Multimedia Publishing at the University La Sapienza in Rome and completed a master's degree in Web and Social Media Marketing.

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