Coinbase aims to expand its derivatives offerings in the European Union by acquiring a MiFID-licensed entity in Cyprus. Pending regulatory approval, this move strengthens Coinbase’s market presence in 2024.
MiFID II refers to the EU’s updated rules governing financial instruments. The EU updated the legislation in 2017 to address criticism that it was too focused on stocks and didn’t consider other asset classes, like fixed income, derivatives and currencies.
According to a blog post, Coinbase can begin offering regulated derivatives in the EU, like futures and options, with a MiFID II license. The company already offers spot trading in Bitcoin and other cryptocurrencies. The deal is subject to regulatory approval, and Coinbase expects it to close in 2024.
Coinbase stated that to acquire the entity, it ensures compliance with its Five-point Global Compliance Standard, covering Anti-Money Laundering (AML), Know Your Customer (KYC), global sanctions, and governance. Its five-point international compliance standard benchmarks compliance and operational integrity in the cryptocurrency market.
Derivatives are a vital focus for Coinbase, constituting 75% of total crypto trading volumes. While Coinbase aims to compete, it faces stiff competition from more prominent players like Binance and other firms, including Bybit, OKX, and Deribit. Derivatives are financial instruments that derive their value from the performance of an underlying asset, index, or rate.
Coinbase has been actively pursuing global growth due to challenges in its home market. It is currently facing a lawsuit from the U.S. Securities and Exchange Commission, accusing it of violating securities laws.
In October, the company selected Ireland as its central regulatory hub in the EU in anticipation of upcoming crypto regulations called Markets in Crypto-Assets (MiCA). It has applied for a single MiCA license, aiming to secure it by December 2024, when the EU fully implements the rules.
In December, Coinbase also obtained a virtual asset service provider license from France, which permits it to offer custody and trading in crypto assets in the country.