Coinbase Launches Bitcoin Rewarding Credit Card and US Crypto Futures Contracts

Coinbase has announced the launch of a new Bitcoin-rewarding credit card and the introduction of two US-based crypto futures contracts, both set to go live on July 21. These initiatives aim to expand the exchange's presence in consumer spending and derivatives trading.

The new credit card, scheduled to be released this fall, will allow users to earn up to 4% back in Bitcoin for every purchase made. However, access to this card requires a subscription to Coinbase's premium trading service. The rewards will be deposited directly into the user's Coinbase account, bypassing third-party processors. This feature is designed to attract users already within the Coinbase ecosystem, although not everyone is convinced of its benefits.

The concept of crypto rewards is not new, with exchanges like Gemini and Crypto.com already offering similar cards. What sets Coinbase's card apart is the use of Bitcoin as the underlying asset, which introduces volatility to the rewards. Unlike traditional cashback cards, the value of the rewards can fluctuate based on market conditions, effectively turning users into investors. This risk is compounded by the standard hazards of credit card use, such as high interest rates, potential debt accumulation, and exposure of personal data. Coinbase assures users that its platform has never experienced a wallet breach, and that card rewards are securely deposited into Coinbase wallets.

Some long-time crypto enthusiasts are skeptical about the new card. Graham Friedman, who leads crypto venture deals at Republic, expressed concerns about privacy and the nature of credit cards, which involve sharing personal information across multiple companies. He prefers traditional airline cards that offer seat upgrades and miles, allowing him to invest in assets separately. However, for others, the idea of accumulating Bitcoin through everyday purchases aligns with a long-term crypto strategy, making the card an appealing option.

In addition to the credit card, Coinbase is launching two US-based perpetual-style futures contracts through its Coinbase Derivatives Exchange. These contracts, which include a nano Bitcoin contract at 0.01 BTC and a nano Ether contract at 0.10 ETH, are designed to function like global perpetual futures but under US regulatory oversight. This move aims to provide a legal, domestic alternative to offshore trading, which comes with additional risks such as custody concerns, regulation issues, and counterparty risk.

The new contracts feature five-year expirations and will trade 24/7. They include a funding rate mechanism that keeps the futures prices in sync with the spot market. Funding builds up every hour and settles twice per day, with the collected funding either credited or debited to the trader's account based on their position. Coinbase's goal is to offer the experience of spot trading while providing access to leverage, capital-efficient trading, and regulated clearing. The contracts are designed to be small, allowing traders to size their positions with more precision and avoid overexposure.