Even while Coinbase wants to be a player in the EU derivatives market, bigger firms like Binance, Bybit, OKX, and Deribit will be tough competitors.
By purchasing a Cyprus-licensed organisation under the Markets in Financial Instruments Directive 2014 (MiFID II), Coinbase hopes to increase the scope of its derivatives products within the European Union.
The revised EU regulations pertaining to financial instruments are referred to as MiFID II. In response to concerns that the regulation was overly centred on stocks and ignored other asset classes, such as fixed income, derivatives, and currencies, the EU revised it in 2017.
With a MiFID II licence, Coinbase can start providing regulated derivatives, including as futures and options, in the EU, according to a blog post. The business already provides spot trading for cryptocurrencies like Bitcoin.
According to Coinbase, acquiring the company with its headquarters in Cyprus guarantees adherence to its “Five-point Global Compliance Standard,” which addresses governance best practices, ongoing monitoring and reporting, worldwide sanctions enforcement, know your customer (KYC), anti-money laundering (AML), and continuing monitoring.
With derivatives accounting for 75% of all cryptocurrency trade activity, Coinbase places a high priority on them. Although Coinbase wants to be competitive, it must contend with stronger competitors in the derivatives markets, including as Binance, Bybit, OKX, and Deribit. Financial instruments known as derivatives get their value from an underlying asset’s, index’s, or rate’s performance.
Due to difficulties in the US, where it is headquartered, Coinbase has been aggressively seeking global expansion. The U.S. Securities and Exchange Commission is suing it right now, claiming that the exchange broke securities laws.
Coinbase chose Ireland as its primary EU regulatory centre in October 2023 in advance of the Markets in Crypto-Assets Regulations, or MiCA, which are due to take effect soon. When the EU completely implements the regulations in December 2024, it hopes to obtain the single MiCA licence for which it has applied.
Coinbase also received a licence in December to operate as a virtual asset service provider in France, allowing it to provide custody and trading services for cryptocurrency assets there.