TL;DR
- Coinbase reveals it has entered an agreement to buy an unnamed holding company with the MiFID II license.
- With the MiFID II license, Coinbase can offer regulated EU derivatives. They include futures and spot trading in Bitcoin, among other cryptocurrencies services.
Coinbase Targets EU Derivatives Markets
Crypto exchange Coinbase plans on venturing into crypto-linked derivatives in the European Union.
Coinbase admitted that it has agreed with an unnamed holding company to acquire it in an exclusive report with CNBC.
The company in question holds a MiFID II license, which will allow the crypto exchange to offer derivatives in the EU.
MiFID II refers to the EU’s revised regulation governing financial instruments. It was updated in 2017 to address concerns of over-focusing heavily on stocks. It also overlooked other asset classes like fixed income, currencies, and derivatives.
The move to provide derivatives is part of Coinbase’s long-standing ambition of catering to institutional customers.
If everything is completed successfully, it would mark the first launch of derivatives trading by Coinbase in the EU.
This license would help expand access to our derivatives products by allowing Coinbase to offer them to eligible European customers in select countries across the EU.
Coinbase stated in a blog post.
Derivatives Trading Crucial Battleground for Coinbase
Currently, Coinbase is offering spot trading in Bitcoin and other cryptocurrencies.
This acquisition is still subject to regulatory approval. The crypto exchange anticipates to finalize the deal in 2024.
The derivatives market is important for Coinbase. According to the crypto exchange, derivatives comprise 75% of the entire crypto trading volume.
Coinbase will face major players like Binance, Bybit, Deribit, and OKX, who have already made headway in the crypto-linked derivatives market.
It plans on carving a space for itself on this battleground. Currently, the crypto exchange doesn’t offer derivative products in the U.K. due to regulatory bans imposed by the FCA.
Coinbase, however, offers trading in ether and bitcoin futures in the U.S. and other markets outside the United States.
The crypto exchange reiterated that it would adhere to rigorous compliance standards that the EU upholds.
It includes regulations to combat money laundering, sanctions, and customer transparency.
Coinbase is committed to ensuring five-star global compliance. It’s supported by a team of at least 400 professionals with agency experience, including FBI and DOJ.
Coinbase to Further Cement its Regulatory Footprint in Europe
Derivatives are financial instruments that derive value from the underlying asset’s performance. Futures are derivatives that allow investors to speculate on the future value of an asset.
Futures trading is generally riskier than spot markets, given the volatile nature of cryptocurrencies.
In addition, it’s relatively risky, considering the potential for massive gains and losses through leverage.
The move to venture into derivatives trading follows Coinbase recent expansion efforts outside the United States.
Coinbase has various legal battles with the SEC, alleging securities law violations. And has since been looking for international opportunities far away from home.
The crypto exchange chose Ireland as its primary regulatory base in the EU. It applied for one MiCA license to align itself with incoming crypto laws.
Do you think Coinbase aggressively pursues international expansion due to tougher times at home?
Suchet Salvesen
Suchet is a Norwegian economist, entrepreneur, and investor, serving as the CFO and COO of Brainfund. With over a decade of experience in global expansion, venture capital, and emerging technologies, he earned his MBA from the NMBU School of Business & Economics. He held dual bachelor's degrees from the University of South-Eastern Norway. His career spans roles at NextToMe, Get, and Conax before joining Everipedia, now Brainfund, in 2017.
