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Coinbase, a major player in the cryptocurrency exchange market, is set to enhance its derivatives offerings in the European Union. The company has strategically acquired a Cyprus-based entity licensed under the Markets in Financial Instruments Directive 2014 (MiFID II). This move is a significant step in the exchange’s expansion within the EU’s derivatives market.
MiFID II and Coinbase
MiFID II, the EU’s updated legislation governing financial instruments, was revised in 2017 to include a broader range of asset classes such as fixed income, derivatives, and currencies. With the acquisition of a MiFID II-licensed entity, the company is now positioned to offer regulated derivatives, including futures and options, in the EU. This complements its existing services, which already include spot trading in Bitcoin and other cryptocurrencies.
Compliance and Market Competition
Coinbase emphasizes its commitment to compliance through 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. The acquisition in Cyprus aligns with these stringent compliance measures.
However, Coinbase faces stiff competition in the EU derivatives market. Prominent players like Binance, Bybit, OKX, and Deribit are already established in this space. Derivatives, being financial instruments that derive their value from an underlying asset, index, or rate, constitute 75% of total crypto trading volumes, highlighting their significance in the market.
Coinbase’s Global Expansion Amid Challenges
Coinbase’s move to expand in the EU comes amid challenges in its home market, the United States. The company is currently embroiled in a lawsuit with the U.S. Securities and Exchange Commission, accused of violating securities laws. In response to these challenges, the company has been actively pursuing global growth.
In October 2023, the exchange selected Ireland as its central regulatory hub in the EU, in anticipation of the upcoming Markets in Crypto-Assets Regulations (MiCA). The company aims to secure a single MiCA license by December 2024, when the EU fully implements these rules. Additionally, in December, Coinbase obtained a virtual asset service provider license in France, allowing it to offer custody and trading in crypto assets in the country.
Looking Ahead For Coinbase
The exchange’s strategic acquisition in Cyprus marks a significant step in its EU expansion, particularly in the derivatives market. While the competition is fierce, Coinbase’s commitment to compliance and its global growth strategy position it as a key player in the evolving landscape of cryptocurrency trading and financial services.
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