Coinbase Set to Expand Crypto-Linked Derivatives in the EU

Table of Contents

• MiFID II Allows Coinbase to Offer Regulated Derivates
• Global Expansion Strategy
• Coinbase’s Derivatives Business

Crypto exchange Coinbase plans to launch crypto-linked derivatives in the European Union (EU). The exchange will acquire a holding company with a MiFID II license, allowing it to offer regulated derivatives in the EU.  

Coinbase is expanding crypto-linked derivatives trading to the EU. The exchange agreed to acquire a holding company with a MiFID II license. 

MiFID II Allows Coinbase to Offer Regulated Derivates

US-based cryptocurrency exchange Coinbase plans to enter the EU derivatives market. In a blog post, the exchange announced plans to acquire an unnamed entity in Cyprus that owns a MiFID II license. According to the exchange, the license would help it “expand access to our derivatives products by allowing Coinbase to offer them to eligible European customers in select countries across the EU.” Coinbase currently offers only spot trading in the EU.  

The EU’s MiFID license is one of the most highly regarded licensing frameworks governing investment services and activities. CNBC explains that MiFID, or “Markets in Financial Instruments Directive,” was introduced in 2007 to help Europe integrate its disparate financial markets and drive down trading costs. MiFID II is the EU’s updated rules for governing financial instruments. MiFID II, introduced in 2017, addresses criticism that it was too focused on stock and neglected to consider other asset classes such as derivatives and currencies, CNBC reports.  

Global Expansion Strategy

In its blog post, Coinbase explained that the acquisition is part of its global expansion. According to CNBC’s reports, the exchange has been trying to expand its offerings to institutions, including hedge funds and high-frequency trading firms, to benefit from the large-size transactions undertaken by such traders. 

“Adding such a license to our international portfolio would further support the strong interest we’ve seen in our derivatives offerings and help us capture more of the ~75% of the global crypto market claimed by derivatives,” Coinbase explained. 

In accordance with Coinbase’s dedication to compliance, it said:

“As the industry leader in trusted, compliant products and services, we aim for the highest standards for regulatory compliance, and before operationalizing any license or serving any users, this entity must achieve our Five-point Global Compliance Standard.” 

Coinbase’s Five-point Global Compliance Standard includes:

• A vetted and trusted team;
• Industry-leading anti-money laundering (AML) and Know Your Customer (KYC) standards;
• Global sanctions enforcement;
• Governance best practices; and
• Ongoing rigorous monitoring and reporting. 

A team of over 400 compliance and legal professionals with experience from careers with the FBI, DOJ, OFAC, FinCEN, Scotland Yard, significant banks, and other key regulators design and oversee Coinbase’s  Five-point Global Compliance Standards. 

Coinbase concluded its announcement by saying:

“We have a long road ahead before finalizing the acquisition and operationalizing the EU MiFID licensed entity, but this is an exciting step forward in our efforts to expand access to our international derivatives offerings and bring a more global and open financial system to 1 billion people around the world.” 

Coinbase’s Derivatives Business

In a bid to expand its crypto-linked derivatives business, Coinbase previously pursued to acquire bankrupt crypto exchange FTX’s European entity. Until it collapsed, FTX Europe was the only entity offering a form of crypto derivatives called perpetual futures. Coinbase recently secured regulatory approval from the Bermuda Monetary Authority, enabling perpetual futures for eligible non-US retail customers. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.