Margin trading at Coinbase is (or almost) over! The exchange is forced to stop offering margin trading to its clients, to avoid the wrath of the CFTC.
Curtain on margin trading at Coinbase
November 24, 2020 Coinbase announces that it will prevent clients from placing margin trading on November 25, 2020 from 10 p.m. UTC, following recent regulation of the CFTC. The platform also plans to cancel any limit order.
Coinbase will stop margin trading in December 2020, when all ongoing trades have expired.
The exchange mentioned in particular its inability to comply with the March 2020 guidelines of the CFTC, regarding the “effective delivery” of digital assets.
Margin trading is a loan for clients and not a definitive acquisition; in other words, delivery of a cryptocurrency to a buyer via such a transaction does not take place, as the client has not legally taken control of the crypto.
But the rules of CFTC have neither Coinbase, nor any entity affiliated with it, may have control over a cryptocurrency acquired through margin trading.
Coinbase had already challenged this provision before in a letter addressed to the CFTC ; the exchange claimed the right for its affiliates to hold cryptocurrency.
In order to continue to offer its clients leverage products or margin trading operations in the current legal context, Coinbase should register with the CFTC as a commodity exchange.
BitMEX is not an example to follow
Customers of Coinbase will henceforth have to move towards other exchanges such as Kraken – also based on United States and who should therefore address this issue of the “effective delivery” of digital assets – or Binance, for margin trading.
Coinbase does not want to take legal risks to avoid being under the legal fire of the American regulator.
The CFTC announced in a press release dated October 1, 2020, that the commission filed a civil complaint against BitMEX for lack of registration and lack of procedures KYC and anti-AML.
Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.
A possible comeback in margin trading for Coinbase? The CFTC’s new directions will likely take its toll on exchanges reluctant to cooperate with US authorities and comply with applicable regulations. Coinbase, on the other hand, “loves” working with the Internal Revenue Service, the DEA.
Litecoin, welcome in the Silver Age