Renowned United States of America-based crypto exchange, Coinbase has announced that it will end its margin trading services Today. The statement released by the firm explained that margin trades would no longer be allowed on the platform according to guidance from the Commodity Futures Trading Commission (CFTC).
According to the crypto exchange, no user will open any new margin trading starting from 5 pm on November 25. Furthermore, the crypto exchange explained that the margin trading feature would be disabled from its platform after margin positions already opened by users on the platform officially closes.
Coinbase to close all marginal trading by next month
With this new development, Coinbase will officially close its margin trading feature by the beginning of next month. Margin trading is a feature that allows customers to afford the total cost of investment by borrowing funds from crypto exchange to fund the payment.
This feature will enable users to exchange their positions for the funds, which will, in turn, determine and increase the rate at which they will gain or lose in the investment. In its statement, the crypto exchange pointed out that it will disable the feature after pointing out to a recent directive that was released by the CFTC.
Coinbase noted that the recently released guide called ‘actual delivery’ is the main reason why it will not continue to offer the service but failed to pint out the part of the released guidance that it did not want to follow hence the move to shut down its margin trading feature. The directive released by the authority was said to have been an upgrade of the enforcement action slammed on Bitfinex in 2016.
According to the details of the enforcement, users who have taken control of the crypto provided by the exchange should be guided by a specific law. This law should further guide their actions even if the crypto is acquired via margin trading or leveraged product.
Coinbase not pleased with ‘actual delivery’ guidance
The guidance also stated that all the assets that have been purchased via leverage or margin trading should not be liquidated. With the look of things, it appears that Coinbase is finding the guidance very strict or impossible to follow as the crypto exchange feels that it can no longer monitor or have control over digital assets once it has been sent to the receiving party.
In the ‘actual delivery’ guidance that was released by the CFTC, the regulatory body recognizes that a customer should have full control over any crypto he purchases via any means, and the crypto exchange can no longer control the digital asset in question.
In its previous letter to the CFTC over the guidance back then, Coinbase told the body that some major affiliates of the seller should exercise control over the sold digital assets. According to the previous Chief Legal and Risk Officer of Coinbase in 2018, Mike Lampres, if a crypto exchange should entirely hand over the crypto assets to a customer, it means that some entities in the United States that use cold storage will not be able to hold digital assets that are acquired through marginal trading.