Coinbase is making strategic moves to introduce crypto derivatives in the European Union, initiating plans for an acquisition to secure the necessary licensing.
In an exclusive update to CNBC, Coinbase revealed its agreement to acquire an undisclosed holding company possessing a MiFID II license.
The MiFID II license, governing financial instruments in the EU, positions Coinbase to offer regulated derivatives like futures within the EU, complementing its existing provision of bitcoin and other cryptocurrency spot trading.
This initiative aligns with Coinbase’s pursuit of catering to professional and institutional clienteles, signaling a strategic expansion aimed at higher-volume transactions from entities like hedge funds and high-frequency trading firms.
Upon finalization of the deal, this move will mark Coinbase’s inaugural foray into derivatives trading in the EU, pending regulatory approval expected later in 2024.
“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,” stated Coinbase in an exclusive blog post shared with CNBC.
Derivatives represent a substantial segment for Coinbase, accounting for approximately 75% of the overall crypto trading volumes. While Coinbase aims to fortify its derivatives offering in the EU, it faces significant competition, notably from industry leaders like Binance, Bybit, OKX, and Deribit.
The acquisition reflects Coinbase’s strategic focus on international expansion, supplementing its ongoing efforts outside the U.S., including Ireland's selection as its primary EU regulatory base and the pursuit of a Markets in Crypto-Assets (MiCA) license by December 2024.
Derivatives, known for their value derivation from underlying assets, encompass instruments like futures, enabling speculation on future asset worth. Despite their potential, derivatives are considered riskier due to cryptocurrency market volatility and leverage utilization, amplifying gains and losses.
Coinbase’s proactive stance in pursuing international markets stands as a crucial facet amid its domestic regulatory challenges, including ongoing litigation with the U.S. Securities and Exchange Commission (SEC).
This strategic maneuver positions Coinbase as a frontrunner in the evolving landscape of crypto derivatives, augmenting its global footprint beyond its existing offerings and regulatory obstacles.
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