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Coinbase Expands European Footprint through Strategic Derivatives Acquisition

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Coinbase Unveils Expansion into EU Derivatives Market

Coinbase has announced its intention to introduce cryptocurrency-linked derivatives in the European Union (EU) market.

As reported by CNBC, the company has informed the public about its agreement to acquire an undisclosed holding company holding a MiFID II license.

MiFID II, the EU’s updated financial regulation introduced in 2017, was revised to address concerns that it focused too narrowly on stocks, overlooking other asset classes like derivatives, fixed income, and currencies.

This move by Coinbase to offer derivatives aligns with its longstanding goal to serve professional and institutional clients.

Upon the successful completion of the acquisition, Coinbase will venture into derivatives trading in the EU for the first time.

Armed with the MiFID II license, Coinbase will be empowered to provide regulated derivatives, including futures and options, to customers in specific EU countries.

Coinbase to Venture into European Derivatives Market Pending Regulatory Approval

Currently focused on spot trading in cryptocurrencies, Coinbase has unveiled plans to extend its services to include crypto-linked derivatives in the European Union (EU) market. The acquisition required for this expansion is contingent upon regulatory approval, with Coinbase anticipating the deal’s closure later in 2024.

In a blog post, Coinbase expressed its anticipation, stating, “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.” The company emphasized its commitment to regulatory compliance, outlining a Five-point Global Compliance Standard that must be met before operationalizing any license or serving users.

Notably, derivatives trading constitutes a significant portion of Coinbase’s operations, accounting for 75% of overall crypto trading volumes. In a competitive landscape dominated by major players like Binance, Coinbase aims to secure its position in the crypto-linked derivatives market.

Coinbase currently does not offer crypto derivatives products in the United Kingdom due to regulatory restrictions. However, the company provides trading in bitcoin and ether futures in the United States and various other international markets.

Derivatives, including futures, allow investors to speculate on the future value of an asset. Despite the potential for amplified gains and losses through leverage, derivatives trading, particularly in the volatile realm of cryptocurrencies, is considered riskier than spot markets.

Coinbase’s foray into derivatives aligns with its recent international expansion efforts, spurred by regulatory challenges in the United States, including a lawsuit from the US Securities and Exchange Commission alleging securities law violations. The company has designated Ireland as its primary regulatory base in the EU and applied for a single MiCA license to comply with upcoming crypto laws. Additionally, Coinbase has secured a virtual asset service provider license in France.

In late September, Coinbase received regulatory approval to offer perpetual futures trading services to retail customers outside the United States. The company also obtained additional regulatory approval from the Bermuda Monetary Authority (BMA) to offer perpetual futures trading to non-US retail users. These strategic moves underscore Coinbase’s commitment to international growth amid evolving regulatory landscapes.

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