Coinbase gets nod to offer futures for retail customers

This approval will enable eligible customers to access perpetual futures contracts on Coinbase Advanced in the near future.

The new product addition will help traders take advantage of volatility, hedge risk and discover prices through options, which are generally simple and have no special or unusual features. As more sophisticated investors enter the crypto market, the notice reflects increasing investor interest in trading derivatives, which let traders make bets on the price of cryptocurrencies without the need for actual delivery.

“As announced in the Phase II of our “Go Broad, Go Deep” strategy, we are dedicated to partnering with high-bar global regulators to build a crypto regulatory framework that allows crypto technology to continually drive innovation,” Coinbase said in blogpost.

The US-based publicly traded exchange launched its international derivatives exchange in Bermuda amid a deepening regulatory crackdown at home. The launch came after the company received regulatory approval from the Bermuda Monetary Authority as part of an aggressive expansion outside the United States.

After unveiling the plan in March, Coinbase announced the move in May, joining other prominent US-based firms that have already taken their business elsewhere due to an increasingly hostile regulatory environment.

The offshore entity, called Coinbase International Exchange, allows users outside the US to trade on both spot and derivatives markets. Bitcoin and Ether perpetual contracts were initially introduced as its first derivative contracts, but other products are expected to launch soon afterwards.

A perpetual contract is a type of futures contract that does not have an expiry date. Instead, it is designed to be held indefinitely, as long as both parties meet their margin requirements. Perpetual contracts are commonly used in cryptocurrency trading and are similar to traditional futures contracts, but without an expiration date.

Coinbase International initially caters to market makers and institutional clients, offering up to five times leverage while trades will settle in the USDC, the stablecoin pegged to the US dollar that was developed in concert with Circle.

Crypto derivatives, which are popular on overseas exchanges like Binance, allow traders to place leveraged bets on whether digital assets will rise or fall. Such products are mostly banned for retail investors in the US due to investor-protection requirements, AML rules and safeguards against market manipulation.