Coinbase wades into crypto derivatives with deal for futures exchange

Coinbase is buying a nascent futures exchange to gain a foothold in crypto derivatives, complementing its presence as the largest instantaneous cryptocurrency exchange in the United States.

The company said Wednesday that it will acquire FairX, which was launched last year and is subject to supervision by the US Commodity Futures Trading Commission.

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

The acquisition came as financial exchange operators, including CME Group, began offering cryptocurrency futures contracts to provide a well-established and regulated venue where traders could speculate or hedge their holdings.

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

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

“The development of a transparent derivatives market is an important inflection point for any asset class, and we believe it will open up more participation in the crypto economy,” Coinbase said.

Derivatives products have been at the center of regulators’ concerns regarding some cryptocurrency exchanges because they can quickly expose retail investors to huge losses. The UK’s 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 on Coinbase rose 1.2 percent on Wednesday.

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