Coinbase to buy FairX

Coinbase, an American company that operates a cryptocurrency exchange platform, has recently announced its intention to buy FairX, a US-based derivatives platform. Already registered with U.S. regulators, the firm could give Coinbase the edge it needs in getting a derivatives marketplace up and running. Coinbase rose in premarket trading on Thursday after the crypto trading platform said it would acquire a derivatives exchange FairX. (Coinbase was up by 2.8% to $241.19 in premarket trading).

 Coinbase may be able to offer crypto derivatives products in the United States due to this action. Only a few exchanges currently allow American investors to buy bitcoin and ether futures, with cash-settled contracts being the most popular and longest available.

Coinbase plans to offer regulated crypto derivatives to its customers with the acquisition. FairX’s existing partners and infrastructure will be used to accomplish this. Coinbase stated in its announcement that the acquisition’s primary goal is to make the derivatives market more “accessible” to its millions of retail consumers.

FairX is a Commodity Futures Trading Commission (CFTC)-registered designated contract market (DCM), which means it can provide futures products in the United States.

Coinbase has also applied to join the National Futures Association, a self-regulatory group in the United States that oversees derivatives platforms.

FairX is a relatively new futures exchange that opened in May 2021 after a regulatory license in late 2020. According to the company’s statement at the time, FairX had connections with large brokerages such as TD Ameritrade, ETrade, ABN AMRO, Wedbush, Virtual Financial, and a few others, which sold FairX’s futures products or supplied clearing services. Although it doesn’t have formal partnerships with any of these companies, Coinbase is undoubtedly hoping that some will soon provide its crypto derivatives.

FairX, a Chicago-based company, now provides Coinbase a means to speed up the process. The Commodity Futures Trading Commission already regulates it, and it allows for margin trading, which is essential for recruiting investors. 

Fees on crypto spot trading have been Coinbase’s primary source of revenue so far. However, Coinbase’s acquisition of FairX, which is expected to conclude in the first quarter of this year, is the final push for the company to enter the lucrative crypto derivatives industry.

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