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Coinbase withdraws margin trading in response to regulatory requirements

In response to new guidelines from US regulators, the Coinbase Pro platform is discontinuing its margin trading functions. A trading option that keeps disappearing and then coming back.

Margin trading on Coinbase is over

According to a press release from Coinbase, users of the platform who engage in margin trading will no longer be able to open orders from today 25 November at 23:00 Paris time. The service will be completely deactivated when all open positions end next month, probably on 20 December.

For those who still have open positions on that date, those positions will be closed out. The underlying cryptomoney will be sold for the value of the loan.

To justify this decision, Coinbase points to the recent guidance of the Commodity Futures Trading Commission (CFTC), a US regulator.

"We believe that clear and sensible regulation of margin lending products is necessary to protect and reassure US clients. We look forward to working closely with regulators to achieve this goal," said Paul Grewal, General Counsel of Coinbase.

Intermittent service

Coinbase has a special relationship with margin trading. In the past, this functionality has disappeared several times before being reintroduced on the platform.

Margin trading made its first appearance on GDAX in 2017, the former name of Coinbase Pro. That same year, a flash crash of the Ether (ETH) from over $300 to just 10 cents caused Coinbase to discontinue the service, notably following a warning from the CFTC.

After almost three years of interruption, margin trading resumed on Coinbase Pro in February. Although the service is being withdrawn again, it is not inconceivable that it will be available again on the platform in the near future.

For Coinbase users, there are many other platforms offering margin trading. These include Crypto.com, Binance, Huobi and Kraken. However, regulators are likely to continue to attack this trading option. It is still often seen as a high-risk trading strategy.