Key takeaways:
- Cryptocurrency exchange Coinbase plans to acquire a MiFID-licensed entity located in Cyprus.
- This strategic move is designed to boost Coinbase’s derivatives offerings across the European Union.
In a strategic move to broaden its derivatives offerings across the European Union, cryptocurrency exchange giant Coinbase has announced plans to acquire a MiFID-licensed entity in Cyprus.Ā
The endeavor, pending regulatory approval, is set to significantly enhance Coinbase’s market presence in 2024.
The company has reportedly entered into an agreement to acquire an unnamed holding company, which holds a MiFID II license. MiFID II, the European Union’s updated regulation governing financial instruments, underwent revisions in 2017 to address concerns about its focus on stocks, overlooking other asset classes such as derivatives, fixed income, and currencies.
This move aligns with Coinbase’s long-standing ambition to serve professional and institutional customers.
Founded 12 years ago, Coinbase has been actively seeking to expand its offerings to institutions like hedge funds and high-frequency trading firms. This strategic move aims to capitalize on the larger transaction sizes typically associated with these types of traders.
Upon completion of the deal, pending regulatory approval, Coinbase would launch derivatives trading in the EU for the first time. The company expects the deal to close later in 2024.Ā
Coinbase stated in a blog post shared with CNBC that the MiFID II license would “expand access to our derivatives products by allowing Coinbase to offer them to eligible European customers in select countries across the EU.”
This expansion into the EU market is poised to have a significant impact on Coinbase’s position. The introduction of cryptocurrency derivatives is seen as a strategic move to enrich trading choices for European customers.
This development comes at a time when the European Banking Authority (EBA) is intensifying efforts to assess the potential impact of strains in non-bank financial institutions (NBFIs), with a particular focus on cryptocurrency-related entities, aiming to enhance the resilience of the EU’s banking sector.
Derivatives are a crucial focus for Coinbase, constituting 75% of total crypto trading volumes. Despite the company’s efforts to compete, it faces stiff competition from prominent players in the derivatives markets such as Binance, Bybit, OKX, and Deribit.
Derivatives, as financial instruments deriving value from the performance of underlying assets, indices, or rates, continue to be a pivotal aspect of Coinbase’s growth strategy within the legal frameworks of its markets.
