America’s largest cryptocurrency exchange, Coinbase, is setting its sights on the European Union’s derivatives market. The company plans to acquire a Cyprus-based entity that holds a MiFID II license.
This license is crucial under the EU’s rules for financial markets, updated in 2017 to include various asset classes like derivatives, in addition to stocks. It also obviates the need for Coinbase to navigate through the bureaucratic maze of securing individual permissions in each EU state.
With this MiFID II license, Coinbase plans to start offering regulated derivatives in the EU, including futures and options. This move is a significant step for the company, which already provides spot trading in Bitcoin and other cryptocurrencies.
Derivatives, which make up 75% of the total crypto trading volumes, are essential for Coinbase’s growth. However, it’s entering a market with strong competition from established players like Binance and OKX. These financial products derive their value from other assets, making them a complex but popular investment choice.
Coinbase’s decision to expand in the EU also comes as the company faces challenges in its home country, the United States. It’s currently involved in a lawsuit with the U.S. Securities and Exchange Commission.
Previously, in October 2023, Coinbase chose Ireland as its main base in the EU. This was in preparation for the upcoming Markets in Crypto-Assets Regulations (MiCA). The company has applied for a MiCA license, hoping to get it by the end of 2024 when the EU fully implements these rules.
Additionally, in December, Coinbase secured a license in France to offer crypto asset custody and trading services. This is part of its broader strategy to strengthen its position in the international cryptocurrency market.
Acquiring these European approvals would be a crucial milestone for Coinbase. With the MiCA license under its belt, the crypto exchange can “passport” its array of services to several European nations, including major markets like Germany, France, Italy, and the Netherlands.
The implementation of MiCA in 2024 is eagerly anticipated as it offers a singular regulatory structure spanning 27 countries and catering to around 450 million individuals. Such a unified framework, overseen by a sole national supervisor, promises to simplify business operations for firms like Coinbase.
