Coinbase is pushing forward with its plans to introduce futures contracts despite facing regulatory challenges in the United States.
On June 1, 2023, Coinbase announced its intention to launch Bitcoin and Ether futures contracts for its users on June 5, 2023. These contracts will be available through its derivatives exchange, which operates under the oversight of the Commodity Futures Trading Commission (CFTC), and will primarily target institutional investors.
By introducing these institutional-sized USD-settled contracts, Coinbase aims to fulfill its mission of offering advanced services tailored to the needs of institutional investors. The institutional-sized contracts provided by Coinbase Derivatives Exchange come with significantly lower fees compared to traditional offerings.
Coinbase specified that the institutional-sized contracts would have a fixed size of 1 Bitcoin and 10 Ether. The exchange noted that this standardized sizing was designed to help clients effectively manage their market exposure. Furthermore, these contracts also come with enhanced risk management features and improved precision, allowing institutions to optimize their capital efficiency.
Coinbase seeks to give institutional participants greater control over their cryptocurrency exposure and the ability to express their opinions in a more capital-efficient manner while monitoring the performance of Bitcoin and Ether.
This move by Coinbase to introduce new products comes amidst its ongoing battle with the U.S. Securities and Exchange Commission (SEC) to address the lack of regulatory clarity surrounding digital asset trading in the United States.
Previously, Coinbase had written a letter to the U.S. SEC, requesting explicit regulations on handling cryptocurrencies in the country. The exchange also opposed a proposed regulation (Safeguarding Advisory Client Assets, Proposed Rule 223-1), arguing that it unfairly targets cryptocurrencies and makes incorrect assumptions about custodial practices based on securities.
In response to Coinbase’s request, the U.S. SEC filed a formal court filing on May 15, 2023. The regulator claimed that the current regulatory framework is sufficient as digital assets are already considered securities, and thus, no additional requirements are necessary. The SEC also stated that establishing new regulations could take several years and reiterated its commitment to enforcing existing regulations within the current framework.
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