Coinbase Acquiring Cyprus-based Entity To Expand Derivatives Offering In EU

Crypto exchange Coinbase revealed plans to offer crypto-linked derivatives in the European Union (EU) market. Coinbase said it has entered into an agreement to acquire the Cyprus-based entity, which holds a Markets in Financial Instruments Directive 2014 (MiFID II) license.

The acquisition is subject to regulatory approval, and Coinbase expects the deal to close later this year. Coinbase didn’t reveal the name of the Cyprus-based firm.

MiFID II refers to the EU’s updated regulation governing financial instruments. The EU revised the legislation in 2017 to address criticism that it was too focused on stocks and didn’t consider other asset classes such as derivatives, fixed income, and currencies.

Coinbase’s decision to provide derivatives is part of its long-standing ambition to cater to institutional and professional customers. With the MiFID II license, Coinbase can provide regulated derivatives, like futures and options, to users in select EU countries. Currently, the exchange offers spot trading in Bitcoin (BTC) and other cryptocurrencies.

The firm has emphasized its commitment to regulatory compliance and trust. The acquisition process of the Cyprus-based firm ensures compliance with the Coinbase “Five-point Global Compliance Standard,” the exchange said. This comprehensive framework encompasses stringent Know-Your-Customer (KYC) and Anti-Money Laundering (AML) standards, global sanctions enforcement, robust governance practices, and ongoing monitoring and reporting.

Derivatives Trading Contributes To 75% Of Total Trading Volume: Coinbase

Derivatives trading is a crucial focus for Coinbase, as the company states that derivatives account for 75% of overall crypto trading volumes. While the platform faces stiff competition from more prominent players in the derivatives markets like Deribit, Bybit, Binance, and OKX, it aims to carve a space for itself in this crucial battleground.

The company said:

“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 is actively seeking global expansion due to challenges in the United States, where it is based. It is currently involved in a lawsuit with the SEC, which accuses the platform of violating securities laws.

Coinbase selected Ireland as its primary regulatory base in the EU in October 2023 and applied for a single MiCA license to comply with upcoming crypto laws. Moreover, it secured a VASP license in France, enabling it to offer crypto custody and trading services in the country.