Digital currency exchange, Coinbase announced that it will no longer offer margin trading services on Coinbase Pro. The company mentioned that due to the recent guidelines from the Commodity Futures Trading Commission (CFTC), Coinbase Pro will disable new margin trades starting from 2 pm PT on 25 November.
According to the official announcement, the exchange is not cancelling existing margin positions as of now, but customers are advised to close existing orders by December as the product will be taken offline after the expiration of existing margin positions.
Coinbase aims to work closely with regulators in the future to comply with requirements. Additionally, the exchange outlined the need for a clear regulatory framework for margin lending products to protect customers in the US.
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In 2017, the San Francisco-based trading platform experienced a flash crash in margin trading services, and following the crash, the CFTC conducted an inquiry about the matter. The exchange relaunched its margin trading services again in 2020, but it seems like, that the company needs to wait for a few more years to relaunch margin trading.
“In response to new guidance from the Commodity Futures Trading Commission, we are disabling our margin trading product. For customers using credit, all open limit orders will be cancelled at this time. The product will be taken offline in December once all existing margin positions have expired. We believe clear, common-sense regulations for margin lending products are needed to protect and provide peace of mind to U.S customers. We look forward to working closely with regulators to achieve this goal,” Paul Grewal, Chief Legal Officer at Coinbase, said in a statement.
The concept of margin trading enables an investor to borrow funds from a third party to trade. CFTC has introduced strict regulations recently to protect investors from potential losses using margin trading. Coinbase took some initiatives to educate investors about the positive and negative side of margin trading, but it seems like the steps were not enough to comply with the regulatory requirements of CFTC.