Details of the application were posted on the NFA website on September 15. However, the website did not give any deep insights into the matter and it has only posted it as a pending application with the name ‘Coinbase Global Inc.’
Coinbase Ventures into Crypto Derivatives
Coinbase exchange confirmed the application on their Twitter page, stating that,
“This is the next step to broaden our offerings and offer futures and derivatives trading on our platforms. Goal: Further grow the crypto economy.”
The application is currently pending, and the NFA will review it. If the NFA approves the application, Coinbase will become a registered FCM member. The next step after NFA approval will be for the exchange to register with the Commodity Futures Trading Commission (CFTC). The CFTC regulates the derivatives market in the US.
The crypto derivatives market in the US lags behind compared to the spot market. Regulators have expressed concerns over the highly risky nature of derivatives, especially in the crypto market. Nevertheless, the market has boomed in 2021 and has prompted the exchange to seek offerings for derivatives products.
Coinbase is not the only cryptocurrency exchange in the US that seeks to venture into derivatives. FTX.US recently finalized an acquisition deal for LedgerX, which will allow the exchange to wade into the derivatives market.
Data from Coingecko shows that in the past 24 hours, the crypto derivatives market has processed over $143 billion in transactions. Binance is taking the lead with the 24-hour open interest at $10.2 billion, while FTX comes in second with $6.9 billion.
Coinbase Actively Expanding Offerings
Coinbase has been making headlines over the past few weeks because of various efforts to expand its offerings. The exchange recently announced plans to launch a crypto lending program for USD Coin. However, it was forced to postpone the launch after being issued a Wells Notice by the Securities and Exchange Commission.
According to the SEC, the lending program is classified as a security because it involves an investment contract. However, Coinbase insists that the lending program is not a security. With the SEC threatening to sue the exchange if the lending program is launched, Coinbase was forced to push the launch to later until it gets approval.
Therefore, the exchange is hopeful that the application for a futures and derivatives license will be smoother compared to its lending product application.
This week, Coinbase also offered $2 billion worth of junk bonds. The exchange had initially placed the junk bond offering at $1.5 billion but increased it to $2 billion following increased demand from investors.
The demand for junk bonds shed light on the positive investor’s views on Coinbase regarding its creditworthiness. Orders worth $7 billion were placed in the junk bond offering in both seven and 10-year bonds.
With this offering, Coinbase became the second most popular crypto firm to issue junk bonds. MicroStrategy issued similar bonds to aid the firm in acquiring more Bitcoins. When issuing the junk bonds, Coinbase stated that proceeds from the same will aid the firm in making acquisitions or any other investment decisions that will enable the company to achieve its goals.