- General
- November 25, 2020
- 4 minutes read
Coinbase Stops Margin Trading For Users
Just about nine months after launching margin trading for Coinbase Pro users, the popular crypto exchange has moved to disable the…
Just about nine months after launching margin trading for Coinbase Pro users, the popular crypto exchange has moved to disable the feature, citing “new guidance from the Commodity Futures Trading Commission”. For those not in the know, margin trading refers to the practice of using borrowed funds from a broker to trade financial assets that form the collateral for the loan from the broker.
The guidance cited by Coinbase refers to one that the US Commodity Futures Trading Commission (CFTC) put out this March, clarifying that in its view, the “actual delivery” of cryptocurrency happens when a customer has complete control over a crypto asset and the broker no longer has any control over the asset by the end of 28 days after a transaction.
The guidance implied that “actual delivery” of crypto assets wasn’t complete if an exchange still maintained control over its private keys as they usually do to ensure collateral in the case of margin trading. Apparently, Coinbase has found it difficult to comply with this guidance and is now turning off the margin trading feature for its users.
Coinbase customers will no longer be able to place new margin trades beginning on Wednesday, the 25th of November whereas, by next month which is December, the feature will be canceled entirely.
“We believe clear, common sense regulations for margin lending products are needed to protect and provide peace of mind to U.S customers,” Coinbase said in a statement, seemingly throwing a jab at the CFTC.
Margin trading is a feature that crypto exchanges have often used to attract customers. Its use is common in stock and commodities trading platforms but not that much for cryptocurrency. As of now, not many crypto exchanges offer margin trading and for the ones who do, it’s usually reserved for premium users.
Beginning just in this February, Coinbase’s own margin lending feature apparently lasted just a few months. The company may bring back the feature in the future, given its statement of “working closely with regulators to achieve this goal”.
