Coinbase, a major player in the cryptocurrency exchange arena, is set to broaden its derivatives offerings in the European Union (EU) by acquiring a Markets in Financial Instruments Directive 2014 (MiFID II) a licensed entity based in Cyprus. This strategic move positions Coinbase to compete in the EU derivatives market, although it faces formidable competition from established players like Binance, Bybit, OKX, and Deribit.
Regulatory Compliance and Derivatives Focus
With the MiFID II license, Coinbase can now venture into offering regulated derivatives in the EU, including futures and options. The company, known for its spot trading services in Bitcoin and other cryptocurrencies, emphasized that acquiring the Cyprus-based entity aligns with its “Five-point Global Compliance Standard.” This standard encompasses Anti-Money Laundering (AML), Know Your Customer (KYC), global sanctions enforcement, governance best practices, and ongoing monitoring and reporting.
Derivatives Landscape and Global Growth Strategy
Derivatives constitute a significant focus for Coinbase, comprising 75% of its total crypto trading volumes. Despite this ambition, Coinbase acknowledges the intense competition it faces from more established players in the derivatives market.
This move comes as Coinbase actively pursues global growth, grappling with challenges in its home country, the United States. The exchange is currently embroiled in a legal battle with the U.S. Securities and Exchange Commission, facing accusations of violating securities laws.
Strategic Moves in the EU
In October 2023, Coinbase selected Ireland as its central regulatory hub within the EU, anticipating the Markets in Crypto-Assets Regulations (MiCA). The company has applied for a single MiCA license and aims to secure it by December 2024 when the EU fully implements the rules.
Further bolstering its presence in the EU, Coinbase obtained a virtual asset service provider license in France in December. This license enables the exchange to offer custody and trading services for crypto assets in the country, marking another step in its global expansion strategy.