US-based cryptocurrency exchange Coinbase Pro announced that there will be no new margin trades, citing guidance from the Commodity Futures Trading Commission (CFTC).
Coinbase Pro Ends Margin Trading Services
Coinbase Pro will end new margin trades starting from November 25, 2:00 pm (PT). Moreover, as per the official announcement, the customers advised closing existing orders by December. However, products will take offline after the expiration of existing margin positions.
Coinbase Pro Chief Legal Officer Paul Grewal added,
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.
Recently, CFTC has delivered strict regulations. The regulation is to protect investors from potential margin trading losses. Moreover, margin trading enables an investor to collect funds from a third party to trade.
Coinbase Pro provides its margin trading experience on the platform. Additionally, users can place a buy or sell for any USD margin books on Coinbase Pro. Placing an order using margin opens a US dollar loan.
However, the exchange will not have any control over crypto used for margin trading once it has been delivered to the customer. Moreover, it is unclear about the impact the move will have on markets. More so, some experts suggest it may cool down the recent price run.
Based on CFTC guidance Coinbase Pro is removing margin trading.
Huge blow to US crypto and likely to drive price impact as it will take a lot of money off the table:https://t.co/8lYHh9PiVf
Wonder how long before other US exchanges are forced to comply.
— Adam Cochran (@AdamScochran) November 24, 2020
Furthermore, Coinbase Pro is one of the most popular cryptocurrency trading platforms. Adding on, it is a highly secure platform with many verification processes in place to protect user accounts. According to CoinGecko, the exchange’s 24 hours trading volume is at $2.22 billion.
In addition, Coinbase also took some initiatives to educate investors about the advantages and disadvantages of margin trading. Moreover, it seems like the steps were not enough to comply with the regulatory requirements of CFTC.