Coinbase wades into crypto derivatives with deal for futures exchange

Coinbase is buying a fledgling futures exchange to gain a foothold in cryptocurrency derivatives, complementing its presence as the largest US-based spot exchange for crypto.

The company said on Wednesday it would acquire FairX, which launched last year and is regulated by the US Commodity Futures Trading Commission.

“Through this acquisition, we plan to bring regulated crypto derivatives to market, initially through FairX’s existing partner ecosystem,” Coinbase said. “Over time, we plan to leverage FairX’s infrastructure to offer crypto derivatives to all Coinbase customers in the US.”

The acquisition comes as other financial exchange operators, including CME Group, have begun offering crypto futures to provide an established, regulated venue where traders can speculate or hedge against their holdings.

FTX US, a Coinbase rival, bought the derivatives platform LedgerX last year. Outside of the US, Binance crypto exchange allows its customers to trade digital asset futures and options. The feature was restricted late last year after the company clashed with the UK regulator.

Chicago-based FairX lists futures contracts that track markets including stock indices and oil. When it launched with the backing of several brokers and trading firms last year, it said it would aim to offer “simpler, more accessible futures for active individual investors”. Contracts are cleared by Nodal Clear, which is controlled by Deutsche Börse.

“The development of a transparent derivatives market is a critical inflection point for any asset class and we believe it will unlock further participation in the cryptoeconomy,” Coinbase said.

Derivatives products have been at the centre of regulators’ concerns concerning some crypto exchanges because they can quickly expose retail investors to heavy losses. The UK Financial Conduct Authority banned the sale of derivatives to retail investors last year.

The deal with FairX is expected to close in the first quarter and financial terms were not disclosed. Shares in Coinbase rose 1.2 per cent the market close on Wednesday.

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