Coinbase Pro Suspends Margin Trading Citing CFTC Guidance

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  • The Coinbase exchange has pulled margin trading from its Coinbase Pro trading platform
  • The exchange cited “recent guidance” from the CFTC as their reason for suspending the service
  • The issue seems to be around “actual delivery” of cryptocurrencies, which Coinbase has publicly raised concerns over

Coinbase pulled margin trading on their Coinbase Pro platform yesterday citing a change in guidance from the Commodity Futures Trading Commission (CFTC). The cryptocurrency exchange giant gave short notice of the decision, posting an announcement on their website a little more than 24 hours before the deadline, with all open limit orders cancelled as a result. While Coinbase didn’t go into details over their surprising move, it is believed to revolve around the CFTC’s March guidance on “actual delivery” of digital assets.

Coinbase Gives 24 Hours Notice of Closure

Coinbase made the announcement Tuesday afternoon, giving margin traders a day to close their orders. Coinbase did not go into detail over the move, making a short statement on the matter on their website which merely hinted at their rationale:

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.

Coinbase did provide an FAQ page in response to the move, but anyone hoping for further clarification was to be disappointed, with the company only stating that “recent changes in our regulatory environment” were behind the move to pull margin trading for retail investors.

“Actual Delivery” Rules Could Be Behind Move

It seems that Coinbase is referring to guidance issued by the CFTC in March around “actual delivery” of digital assets, although why they have only taken action now is not clear. Actual delivery refers to the point at which a customer controls the cryptocurrency they have bought, an issue that has roots in legal action taken against Bitfinex in 2016.

The CFTC states that actual delivery has taken place when a customer controls the cryptocurrency purchased, which includes whether it was acquired via a margin or leveraged product, leaving the seller with no control over the tokens in question.

Coinbase publicly disagreed with this ruling shortly after it was issued, but it seems that their concerns still remain, to the point where they feel the only way to protect themselves is to halt margin trading, with no clear idea of when, or indeed if, it will return.