Coinbase Strategic Move: Acquisition Of Cyprus-based Entity Signals EU Derivatives Expansion

Coinbase seeks to broaden its range of derivatives services within the European Union by acquiring a licensed entity in Cyprus under the Markets in Financial Instruments Directive 2014 (MiFID II).

In 2017, the EU revised the legislation governing financial instruments, known as MiFID II, to address criticism that it overly prioritized stocks and overlooked other asset classes such as fixed income, derivatives, and currencies.

As outlined in a blog post, Coinbase is poised to enter the realm of regulated derivatives within the European Union, including futures and options, following the acquisition of a MiFID II license. However, this development comes as an expansion of the company’s existing services, encompassing spot trading in Bitcoin and various other cryptocurrencies.

Coinbase emphasized that the entity’s acquisition in Cyprus aligns with its commitment to the “Five-point Global Compliance Standard.” This standard encompasses Anti-Money Laundering (AML), Know Your Customer (KYC), global sanctions enforcement, governance best practices, and continuous monitoring and reporting, ensuring comprehensive compliance.

Derivatives are pivotal in Coinbase’s strategic priorities, representing 75% of the overall crypto trading volumes. As Coinbase endeavors to establish itself in this arena, it encounters formidable competition from major players in the derivatives markets, including Binance, Bybit, OKX, and Deribit. These financial instruments derive their value from the performance of an underlying asset, index, or rate.

Coinbase Global Expansion Amid Legal Challenges

Moreover, Coinbase has actively pursued a global expansion strategy in response to challenges within its home country. Currently embroiled in a legal dispute with the U.S. Securities and Exchange Commission over alleged securities law violations, the company has strategically chosen Ireland as its central regulatory hub within the European Union.

The decision to establish a regulatory foothold in Ireland aligns with Coinbase’s forward-looking approach, anticipating the implementation of the Markets in Crypto-Assets Regulations (MiCA). Seeking compliance, the exchange has applied for a singular MiCA license to secure approval by Dec 2024, coinciding with the full implementation of EU regulatory guidelines.

Furthermore, Coinbase secured a virtual asset service provider license in France to fortify its presence in Europe in Dec. This license empowers the company to provide custody and trading services for crypto assets within the French market.

Related Reading | SEC Nears Decision On Historic Bitcoin ETFs

The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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