The American cryptocurrency exchange, Coinbase Pro announced today that its customers will no longer be able to use margin trading on the platform as of Wednesday.
According to the Coinbase blog, the General Counsel Paul Grewal said that starting November 25th at 2:00 PST no new margin trading will be allowed. The exchange stated that the product will be removed entirely in December “as soon as all existing margin positions have expired.”
“We believe that there is a need for clear and sensible regulations governing margin credit products to keep American customers safe and secure.” Said Grewal. “We look forward to working closely with regulators to achieve this goal.”
Grewal said the move was in response to “new guidelines from the Commodity Futures Trading Commission.” or CFTC for its acronym in English. In March, the commission clarified its position on the “actual delivery” of assets to include cryptocurrencies purchased through leveraged trading or other methods. Under CFTC guidelines, physical delivery would have a 28-day deadline to allow buyers to use any digital assets purchased after that period.
When participants trade futures in traditional markets, they are betting on the future price movement of an underlying asset. If they hold these futures until settlement, they will receive the underlying asset which is physically delivered to them. But still, The CFTC guidelines make it clear that in the case of digital assets, the parties who sell tokens and those who act as intermediaries, including Coinbase, would have no control over the cryptocurrencies that are once used for margin trading delivered to the customer.
It is not very clear what impact this decision will have on the markets. However, some experts believe that this could cool the recent price hike.
Based on the CFTC guidelines, Coinbase Pro removes margin trading.
A major blow to US crypto that is likely to have a price impact as it takes a lot of money off the table: https: //t.co/8lYHh9PiVf
I wonder how long it will be before other US exchanges are forced to comply.
– Adam Cochran (@AdamScochran) November 24, 2020
The announcement comes on the same day that Coinbase announced that Form 1099-K will no longer be used to report its users’ cryptocurrency activities to the Internal Revenue Service. This tax form was for Coinbase users who had over 200 transactions and an annual volume of USD 20,000, However, it did not provide an accurate report on the cost base and fair value of a cryptocurrency investment.
Coinbase announced that it will use the 1099-MISC forms to report tax information for customers who have received cryptocurrencies worth $ 600 or more, “from Coinbase earn, rewards in USDC and / or for use in 2020” . However, no tax forms are issued to users who are not US residents outside of the country.