Coinbase Expands Europe Derivatives Offerings With New Operational License
Ready For Europe
Coinbase intends to become a licensed entity in Cyprus in line with the Markets in Financial Instruments Directive 2014 (MiFID II). Thus, it can extend its derivative products in the European Union over time.
The acronym MiFID II refers to the new laws that the European Union has put in place to monitor a variety of financial instruments. It was initially designed to answer concerns about the majority of prior legislation’s focus on stocks.
However, it did not provide adequate protections for other asset classes, such as fixed income, derivatives, and currencies. The amended guidelines (created in 2017) were meant to correct these shortcomings.
According to a blog post on Coinbase, the company’s acquisition of a MiFID II license paves the way for its entry into the regulated derivatives market of the European Union. This policy expansion, which includes futures and options, supplements the company’s existing portfolio, which provides for spot trading in cryptocurrencies such as ETH.
Coinbase’s purchase of this entity not only strengthens its footprint in the EU but also confirms its commitment to providing its consumers with a more diverse range of financial products.
Adhering To Regulatory Process
The acquisition of the Cyprus license is consistent with Coinbase’s commitment to upholding its stringent “Five-Point Global Compliance Standard.” This standard includes critical components like anti-money laundering (AML) measures, Know Your Customer (KYC) processes, governance best practices, and ongoing monitoring and reporting procedures.
Derivatives play a large role in Coinbase’s operational environment, accounting for 75% of the platform’s entire cryptocurrency trading volumes. The strategic importance put on derivatives emphasizes their importance in broadening investment options within the Bitcoin industry.
Meanwhile, Coinbase is experiencing intense competition from well-established derivatives market participants like Binance, Bybit, Deribit, and OKX despite its efforts to remain the leading crypto derivatives platform. Although derivatives are financial instruments that are dependent on the performance of an underlying asset, index, or rate, they have a substantial impact on market dynamics and investment strategies.
Thus, it is feasible to capitalize on market movements and successfully manage risk within the framework of the financial landscape by utilizing them.
Pursuing Global Expansion
Coinbase has faced regulatory scrutiny from various federal agencies in the United States, prompting the company to step up its overseas expansion efforts. At a time, the exchange was embroiled in a legal battle with the US Securities and Exchange Commission (SEC), which claims that the firm breached securities laws.
Consequently, Coinbase chose Ireland as its main operational hub to bolster its position within the European Union, which was a deliberate choice. With the Markets in Crypto-Assets Regulations (MiCA) about to take effect, Coinbase’s decision to expand outside the US shores is timely, as it enables it to explore the EU crypto market in advance.
Furthermore, Coinbase has applied for a single MiCA license to ensure compliance with all applicable legislation. The company will secure this license by December 2024 in accordance with the fully implemented MiCA rules in the European Union.
Also, Coinbase made significant headway in its efforts to strengthen its footprint in Europe last December when it obtained regulatory permission to operate as a virtual asset service provider in France.
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