U.S.-based cryptocurrency exchange Coinbase announced that its platform for professionals, known as Coinbase Pro, will disable its margin trading product on Wednesday, in response to new guidance from the Commodity Futures Trading Commission (CFTC).
Chief Legal Officer Paul Grewal wrote in a Coinbase blog post, “We believe clear, common sense regulations for margin lending products are needed to protect and provide peace of mind to U.S customers.”
Grewal added that Coinbase will work closely with regulators to achieve this goal.
Starting 2 pm PT on November 25, customers currently using margin trading will not be able to place new margin trades. All open limit orders will be cancelled at this time for customers using credit.
All existing margin positions that were created before the cut-off time will not be affected and will run through until the expiration of the loan term (25th day from the date of origination) and the positions will be closed out by selling crypto for the value of the loan.
The Coinbase Pro margin trading product will be taken offline in December once all existing margin positions have expired.
The customers buying power will decrease once margin trading is disabled and they might not be able to execute any orders that were already created. The buying power is checked before the order is created.
In March, the CFTC had issued final interpretive guidance on actual delivery for digital assets. It stated that for digital assets bought using margin or leverage, the offeror and counterparty seller such as Coinbase, would not retain any interest in, legal right, or control over the digital asset at the expiration of 28 days from the date of the transaction, which is the deadline for physical delivery.
A customer securing possession and control of the entire quantity of the digital assets has the ability to use the entire quantity freely in commerce no later than 28 days from the date of the transaction and at all times thereafter.
The guidance clarifies the CFTC’s views regarding the “actual delivery” exception to Section 2(c)(2)(D) of the Commodity Exchange Act (CEA) in the context of digital assets.
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