Coinbase Expands EU Derivatives Offerings with Acquisition of Cyprus-Based Entity

Web 3.0 Financial Services in the European Union

Coinbase is aiming to expand its derivatives offerings in the European Union by acquiring a Markets in Financial Instruments Directive 2014 (MiFID II)-licensed entity in Cyprus. This is in order to comply with the EU’s updated rules governing financial instruments, which were revised in 2017 to ensure a wider range of asset classes, such as fixed income, derivatives, and cryptocurrencies, are taken into account.

The company is now able to offer regulated derivatives in the EU, like futures and options, with a MiFID II license. In addition, Coinbase already provides spot trading in Bitcoin (BTC) and other web 3.0 cryptocurrencies.

The acquisition of the Cyprus-based entity ensures Coinbase’s compliance with its “Five-point Global Compliance Standard”, which includes Anti-Money Laundering (AML), Know Your Customer (KYC), global sanctions enforcement, governance best practices, and ongoing monitoring and reporting.

Derivatives Trading on Coinbase

Derivatives make up a key portion of Coinbase’s business, comprising 75% of all crypto trading volumes. Despite its ambition, Coinbase faces tough competition from other major derivatives players such as Binance, Bybit, OKX and Deribit. Derivatives are financial instruments that derive their value from the performance of an underlying asset, index or rate.

Due to issues in its home country of the United States, Coinbase has been actively pursuing international expansion. In October 2023, Coinbase chose Ireland as its primary regulatory hub in the EU in anticipation of the upcoming Markets in Crypto-Assets Regulations (MiCA). Coinbase has applied for a single MiCA license and hopes to receive it by December 2024 when the EU fully implements the rules.

In December, Coinbase also acquired a virtual asset service provider license in France, allowing it to offer custody and trading services for web 3.0 cryptocurrencies in the country.