Coinbase wades into crypto derivatives with deal for futures exchange

Coinbase is buying a fledgling futures exchange to gain a foothold in crypto derivatives, complementing its presence as the largest US-based spot digital currency exchange.

The company said on Wednesday it would acquire FairX, which launched last year and is regulated by the US Commodity Futures Trading Commission.

"Through this acquisition, we plan to bring regulated crypto derivatives to market, initially through FairX's existing ecosystem of partners," Coinbase saying in a sentence. "Over time, we plan to leverage the FairX infrastructure to offer crypto derivatives to all Coinbase customers in the US."

The acquisition came as financial exchange operators, including CME Group, began offering crypto futures provide an established and regulated place where traders can speculate or hedge their holdings.

FTX US, a rival to Coinbase, bought derivatives platform LedgerX last year. Outside of the US, cryptocurrency exchange Binance allows its customers to trade futures and options on digital assets. trade was restricted in the UK 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 was launched with the backing of various brokers and trading firms last year, it said its aim would be to offer "simpler and more accessible futures for active individual investors". The contracts are settled by Nodal Clear, which is controlled by Deutsche Börse.

“The development of a transparent derivatives market is a critical turning point for any asset class and we believe it will unlock greater participation in the crypto economy,” Coinbase said.

derivative products have been at the center of regulators' concerns regarding some crypto exchanges because they can quickly expose retail investors to heavy 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. Coinbase shares rose 1.2 percent on Wednesday.