Coinbase Acquires Regulated Futures Exchange to Expand Derivatives Offerings

Coinbase is purchasing CFTC-regulated derivatives exchange FairX for an undisclosed amount


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key takeaways

  • Coinbase is expected to acquire FairX this quarter
  • The move shows a growing trend for exchanges to diversify their offerings

Coinbase is buying Commodity and Futures Trading Commission-regulated derivatives exchange FairX for an undisclosed amount, the company announced Wednesday in a blog post.

Coinbase will initially offer derivatives trading through FairX’s existing infrastructure, but plans to eventually “leverage FairX’s infrastructure to offer crypto derivatives to all Coinbase customers in the US,” the post read.

The acquisition is essential to building out Coinbase’s offerings and meeting client demand, the company said.

Coinbase has historically reported trading fees as its main source of revenue, but the exchange has been trying for months to diversify its profit streams. In May 2021, the revamped version of Coinbase Prime, the exchange’s prime brokerage service, was announced. 

Expanding into derivatives trading, which is increasingly becoming more popular than spot trading, by volume, offers another opportunity for revenue diversification.

“These products are in high demand from investors who seek to effectively manage risk, execute complex trading strategies, and gain exposure to crypto outside of existing spot markets,” the blog post read. 

The acquisition comes as other cryptocurrency exchanges look to expand into the same market. In August 2021, FTX announced the purchase of futures and options platform LedgerX. 

“It’s only natural to want to engage the largest capital market in the world inside the US with that same product through all of our existing institutional and retail customers who want to trade these products,” FTX.US president Brett Harrison told Blockworks at the time. 

Coinbase’s acquisition is set to close in the first quarter of 2022. Terms of the agreement have not been disclosed.

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