- New margin trading orders to close at 1400 PST on Wednesday, but the service will remain online until December.
- Coinbase Chief Legal Office, Paul Grewal, says that the company is still committed to working with the regulators.
The leading cryptocurrency exchange in the United States, Coinbase, has made public the plan to close all margin trading services starting Wednesday. As of 1400 PST, no new margin trading orders will be allowed on Coinbase Pro, according to Paul Grewal, the firm's chief legal officer.
Coinbase cites CFTC's new guidelines
The suspension of new orders takes effect on Wednesday, while the full service will go offline in December to allow for the ongoing trades to expire. Coinbase said that it plans to work hand in hand with regulators such as the Commodity Futures Trading Commission (CFTC) because regulation is crucial for the cryptocurrency industry's growth.
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.
In March, the CFTC revised its guidelines regarding "actual delivery" of cryptoassets that gives the customer legal right over the digital assets. According to the regulator, assets bought through margin trading are not supposed to be liquidated.
In other words, Coinbase appears to have refused to give up control over the assets bought because the customer has legal authority. The exchange's Chief Legal and Risk Officer wrote a letter to the CFTC back in 2018 in a bid to discuss the terms of the new guidelines stating that:
Requiring unfettered ability to transfer digital assets would effectively mean that U.S. entities and regulated entities, or entities using cold storage or other asset protection methods, could not hold digital assets acquired through margined transactions.
The regulator published the final draft of the guidelines earlier in 2020, maintaining that the seller (say Coinbase) had no more control over the digital assets sold even via margin trading. Moreover, the CFTC required all entities offering margin trading to duly register with it to continue offering the services.
It is not clear how other cryptocurrency exchanges offering margin trading services in the United States like Kraken will respond to the guidelines. Meanwhile, the cryptocurrency bull cycle continues undeterred by the news.
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