Coinbase applies for NFA license while awaiting SEC lawsuit

Rick Steves

A license from the National Futures Association (NFA) would open the door to cryptocurrency derivatives trading.

Coinbase has applied for a license from the National Futures Association (NFA) under the entity Financial Markets Inc., with the registration currently pending.

The NFA is the industrywide, self-regulatory organization for the U.S. derivatives industry. The move toward derivatives trading is inevitable for its cheer size when compared to spot markets.

The same happens with cryptocurrencies, with derivatives trading processing much more volumes in 24 hours than spot trading with leverage allowing traders to multiply their order size.

For example, key findings from Crypto Compare’s July review show that monthly volume on crypto derivatives exchanges hit $2.5 trillion relative. The derivatives market now represents 56.9 percent of the total crypto market. Crypto spot volumes were worth $1.9 trillion in July.

Binance was the largest derivatives exchange in July by monthly trading volume with $1.4 trillion, or a market share of 55 percent. OKEx (14.9 percent market share) and Bybit (11.6 percent market share) followed with $368 billion and $285 billion traded respectively.

Despite being well established in the United States, having already gone public this year, Coinbase seems to be about to be sued by the Securities and Exchange Commission.

Paul Grewal, Chief Legal Officer at Coinbase, published an article on the firm’s blog stating that after months of effort by Coinbase to engage productively, the SEC gave us what’s called a Wells notice about our planned Coinbase Lend program. A Wells notice is the official way a regulator tells a company that it intends to sue the company in court.

“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”, Mr. Grewal continued.

“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.

Marc Cuban, the billionaire investor, has advised Coinbase to go forward as the lawsuit ould change how DeFi works, but also grow it. “Which is why it’s important for to be aggressive in their engagement with the SEC. It’s better for the industry that they take on the SEC rather than the SEC go after a small decentralized entity and get a quick judgment that becomes the law of the land for DeFi”.

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