Coinbase has recently announced that they are suspending their margin trading services. Starting from Wednesday, November 25, 2020, Coinbase will suspend margin trading services to prevent the users from placing any new margin trade. Moreover, the suspension will also cancel the open limit orders. However, it will be the initial step and the margin trading feature to completely end by the next month. It is believed that the reason behind this suspension is the new guidelines of the Commodity Futures Trading Commission (CFTC). Coinbase Suspends Margin Trading for Actual Delivery of Digital Assets CFTC guidance is the reason behind the step, and the major part is “actual delivery” of digital assets due to which Coinbase plans to suspend margin trading. The exchange has not yet specified what is the most necessary part of the CFTC guidance that led to this suspension. The final draft of these guidelines was published by the CFTC in March 2020. However, it was under the procedure for a really long time. According to this, the exchanges or sellers are not having any control over the digital assets that are sold through margin trading. All these assets cannot be liquidated under these guidelines. Difficulty in Complying with CFTC Requirements Even though Coinbase has planned to suspend its margin trading after facing a lot of difficulties in complying with the CFTC requirements. The exchange has also objected to these guidelines in past by stating that sellers should be able to hold the cryptocurrency. Mike Lempress, former Chief Legal and Risk Officer at Coinbase, wrote a letter to CFTC in 2018, stating: “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.” Coinbase is now required to register with the CFTC as a commodities exchange. By doing so, the exchange can continue offering leveraged products.
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