Coinbase Secures CFTC Clearinghouse Approval to Enable 24/7 USDC Settlement

The US Commodity Futures Trading Commission (CFTC) has approved Coinbase to have its own clearinghouse in the form of Coinbase Clearing LLC for its derivative products through registration. Coinbase stated on September 28 that the CFTC has approved Coinbase Clearing to become a Derivatives Clearing Organisation (DCO), completing the company's regulated US derivatives structure across exchange, brokerage, and clearing operations. The CFTC lists Coinbase Clearing as registered from September 28, with permission to clear fully collateralised futures, options on futures, and swaps. The registration does not give the new clearinghouse authority to handle Coinbase's margined derivatives business. 

Coinbase Completes Three-Part US Derivatives Structure

Coinbase calls the venture the first “USDC-native clearinghouse,” planning to use USDC as collateral, with the settlements taking place on a round-the-clock basis. The term “first USDC-native” is provided by Coinbase itself and does not have any official recognition in the CFTC registry. Coinbase now has three regulated firms that deal with various aspects of its US derivatives business, as the DCO registration has been completed. Coinbase Financial Markets, Inc. is used by the company as its Futures Commission Merchant, whereas Coinbase Derivatives, LLC acts as the Designated Contract Market of Coinbase.  

Coinbase Derivatives is listed by the CFTC as a designated contract market, dating back to November 23, 2020. The firm was formerly called LMX Labs LLC and had operations under the name FairX before becoming Coinbase Derivatives following its acquisition by Coinbase. It has operated under the name Coinbase Derivatives, LLC since December 2023. Before the current clearing registration, Coinbase Derivatives utilized Nodal Clear for the clearing of products that were listed on its exchange. In the CFTC DCM registration data for Coinbase Derivatives, Nodal Clear is identified as the clearing firm in the past registration details.

The Coinbase Clearing allows Coinbase an alternative method to create such products that are permitted under the new DCO license. Coinbase has stated that it will be able to design and clear its fully collateralised contracts directly without compromising its existing exchange and brokerage functions. Molly Abraham, general counsel at Coinbase, referred to the approval as the completion of the “end-to-end derivatives infrastructure” at Coinbase. She pointed out that the structure will enable Coinbase to introduce its derivatives offerings to the market with USDC collateral.

According to the September 28 statement by the company, the intention is to enhance the infrastructure that supports current products as well as develop the infrastructure for future products. According to Coinbase, the DCO is an internal capability for developing and clearing fully collateralised contracts. Coinbase's derivatives platform is regulated and has grown via acquisitions and additional registrations. In 2022, Coinbase acquired FairX, which had a derivatives trading platform under the regulation of the CFTC that became Coinbase Derivatives. The first CFTC designation for this exchange came in November 2020.

Just last week, Nasdaq-listed exchange Coinbase enabled its customers to use the US dollar-pegged stablecoin, USDC, as collateral for Bitcoin holdings without any changes to how much interest they would be paying. The exchange has made available fixed-interest-rate Bitcoin-backed USDC loans where the interest and repayment dates are determined at the time of loan issuance. This Fixed-rate product operates on Morpho Midnight, a decentralised, non-custodial lending protocol for fixed-rate, fixed-term crypto lending that was introduced in July of this year.