Cryptocurrency exchange Coinbase is disabling its margin trading product in order to comply with the new rules set by the Commodity Futures Trading Commission (CFTC).
CFTC’s Rules Affecting Margin Trading Offerings
Coinbase’s chief legal officer, Paul Grewal, explained in a blog post on Tuesday:
In response to new guidance from the Commodity Futures Trading Commission, we are disabling our margin trading product.
Starting on Wednesday, Nov. 25 at 2 p.m. PT, customers currently using Coinbase’s margin trading will not be able to place new margin trades and all open limit orders will be canceled, Grewal detailed. “The product will be taken offline in December once all existing margin positions have expired.”
The chief legal officer further explained that Coinbase believes “clear, common sense regulations for margin lending products are needed to protect” U.S customers, adding that the company “look forward to working closely with regulators to achieve this goal.”
Coinbase began offering margin trading to customers several years ago but discontinued the service after it was investigated by the CFTC following an ethereum flash crash. However, the company rolled out margin trading on Coinbase Pro this year for customers residing in 23 U.S. states, its website details.
While Coinbase did not specify which specific CFTC rules it is trying to comply with, the derivatives regulator published the “Final Interpretive Guidance on Actual Delivery for Digital Assets” in March. Similar rules were used in the CFTC’s enforcement action against Bitfinex back in 2016.
On social media, crypto users are concerned that other exchanges could follow Coinbase and disable their margin trading products. Investor Adam Cochran commented: “Huge blow to US crypto and likely to drive price impact as it will take a lot of money off the table. Wonder how long before other US exchanges are forced to comply.”
<Source: Bitcoin News>