LONDON, UK – NOVEMBER 9: In this photo illustration, an inverted version of the Coinbase logo appears on a mobile phone screen on November 9, 2021 in London, United Kingdom. The crypto exchange platform is scheduled to announce its quarterly results today. (Photo illustration: Leon Neal/Getty Images)
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coinbase plans to offer cryptocurrency-linked derivatives in the European Union and will acquire a company with a license to do so.
A US cryptocurrency exchange exclusively told CNBC that it has entered into a deal to acquire an unnamed holding company that owns the MiFID II license.
MiFID II refers to the EU’s latest regulations governing financial instruments. The EU amended the law in 2017 to address criticism that it was too focused on equities and did not take into account other asset classes such as bonds, derivatives and currencies.
This is part of Coinbase’s long-standing ambition to serve professional and institutional customers.
Founded 12 years ago, the company has sought in recent years to expand its services to institutions such as hedge funds and high-frequency trading firms, seeking to benefit from the much larger trade sizes of these types of traders. There is. .
If Coinbase completes the transaction, the move would mark the start of the company’s first derivatives transaction within the EU.
The MiFID II license will allow Coinbase to begin offering regulated derivatives such as futures and options within the EU. The company already offers spot trading of Bitcoin and other cryptocurrencies.
The transaction is subject to regulatory approval and Coinbase expects it to close in the second half of 2024.
“This license allows Coinbase to offer derivative products to eligible European customers in certain countries within the European Union, thereby increasing the ability of our derivative products to It will help expand access to.”
“As an industry leader in trusted and compliant products and services, we strive for the highest standards of regulatory compliance and ensure that this company meets our five standards before operating a license or providing services to users. Global compliance standards for items must be achieved.”
Coinbase said it aims to adhere to strict compliance standards upheld in the EU, including requirements related to anti-money laundering, customer transparency, and sanctions.
The company said it is committed to ensuring five-point global compliance standards with the support of a team of more than 400 experts with experience at agencies such as the FBI and the Department of Justice.
“While we have a long way to go to complete the acquisition and begin operating an EU MiFID-licensed entity, this will expand access to our international derivatives products and create a more global and open financial system for 1 billion people. “This is an exciting step forward in our efforts to bring the world to the world,” Coinbase said in a blog post.
Derivatives could be a key battleground for Coinbase. According to the company, derivatives account for 75% of the total cryptocurrency trading volume. Coinbase has a long way to go to compete with crypto-linked derivatives market giants Binance, as well as companies such as Bybit, OKX, and Deribit.
According to data from CoinGecko, futures contract trading volume on Binance exceeded $56.6 billion in the past 24 hours. This is much larger than what Coinbase did. The company’s international derivatives exchange had $300 million in futures trading volume in the past 24 hours.
Coinbase does not currently offer cryptocurrency derivative products in the UK, where cryptocurrency derivative products are prohibited. The Financial Conduct Authority banned crypto-related derivatives in January 2020, stating at the time that derivatives pose a risk of harm and are therefore “unsuitable” for retail consumers.
Coinbase currently offers trading in Bitcoin futures and Ether futures in the United States, and Bitcoin futures, Ether futures, “Nano” Ether futures, and West Texas Intermediate crude oil futures in markets outside the United States. doing.
Derivatives are a type of financial instrument that derives value from the performance of an underlying asset.
Futures are derivatives that allow investors to speculate on how much an asset will be worth in the future. Given the notoriously volatile nature of cryptocurrencies like Bitcoin and the use of leverage that can greatly amplify profits and losses, they are generally considered to be riskier than the spot market for digital assets. Masu.
The company made its first foray into derivatives in May, launching an international derivatives exchange in 2016. Bermuda. And the company debuted crypto derivatives in the U.S. in November after receiving regulatory approval from the National Futures Association.
Coinbase was reportedly considering acquiring FTX Europe, the European arm of the now-defunct cryptocurrency exchange, but has since shelved the idea. Report from Fortune. CNBC has not been able to independently verify Fortune’s report.
Expanding outside the US
Transition to derivatives continues Coinbase’s expansion drive in markets outside the US
Coinbase is The company has aggressively pursued overseas expansion over the past year, even as the company faces more challenging times at home. The company is the subject of a lawsuit by the U.S. Securities and Exchange Commission for violating securities laws.
In October, the company submitted an application for a single MiCA license, selecting Ireland as its primary regulatory hub in the EU ahead of the next package of cryptocurrency laws known as Markets in Cryptocurrency (MiCA). December. The rules will be fully applied in 2024.
Coinbase also recently obtained a virtual asset service provider license from France, giving it permission to offer storage and trading of crypto assets in the country.