Coinbase buys a young futures exchange to gain a foothold in cryptocurrency derivatives, complementing its presence as the largest US-based cryptocurrency exchange.
The company said Wednesday it will acquire FairX, which was 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 partner ecosystem,” Coinbase said. “Over time, we plan to leverage FairX’s infrastructure to provide crypto derivatives to all Coinbase customers in the US.”
The acquisition comes as other financial exchange operators, including CME Group, have started offering crypto-futures contracts to provide an established, regulated place where traders can speculate or hedge against their holdings.
FTX US, a Coinbase competitor, bought the derivative platform LedgerX last year. Outside the US, Binance crypto exchange enables its clients to trade futures and digital asset options. The feature was restrict late last year after the company clashed with the UK regulator.
Chicago-based FairX lists futures contracts that track markets, including stock indices and oil. When it launched last year with the support of several brokers and trading firms, it said it would seek to offer “simpler, more accessible futures contracts for active individual investors”. Contracts are clarified by Nodal Clear, which is controlled by Deutsche Börse.
“The development of a transparent derivatives market is a critical inflection point for any asset class and we believe it will unlock further participation in the crypto-economy,” Coinbase said.
Derivatives have been at the heart of regulators’ concerns about some crypto exchanges as they could quickly expose small investors to huge losses. The UK Financial Conduct Authority banned the sale of derivatives to retail investors last year.
The transaction with FairX is expected to close in the first quarter and financial terms have not been announced. Shares in Coinbase rose 1.2 percent, the market closed on Wednesday.