Coinbase, a prominent U.S. cryptocurrency exchange, has unveiled plans to acquire an undisclosed holding company with a MiFID II license, marking a strategic move to introduce crypto-linked derivatives in the European Union. The approximately $200 million deal is aligned with Coinbase's long-standing ambition to cater to professional and institutional customers, particularly hedge funds and high-frequency trading firms.
MiFID II, the EU's updated regulatory framework governing financial instruments, was revised in 2017 to address concerns about its focus primarily on stocks, neglecting other asset classes like fixed income, derivatives, and currencies. Coinbase's acquisition aims to leverage this license to offer regulated derivatives, including futures, in selected countries across the EU.
While Coinbase currently provides spot trading in cryptocurrencies, the acquisition will signify its inaugural foray into the EU derivatives market. Derivatives, which account for about 75% of overall crypto trading volumes, derive their value from the performance of an underlying asset and represent a significant battleground in the crypto space.
The deal, subject to regulatory approval, is anticipated to conclude later in 2024. The company emphasizes its commitment to adhering to rigorous compliance standards, including combating money laundering, ensuring customer transparency, and complying with sanctions.
In a statement shared exclusively with CNBC, Coinbase expressed its dedication to a Five-point Global Compliance Standard, supported by a team of over 400 professionals with experience in agencies such as the FBI and the Department of Justice. The company aims to expand access to international derivatives offerings, fostering a more global and open financial system for a billion people worldwide.
While Coinbase faces competition from larger rivals like Binance in the crypto derivatives market, the move aligns with the company's ongoing global expansion efforts. It ventured into derivatives in May with the launch of an international derivatives exchange in Bermuda and introduced crypto derivatives in the U.S. in November after regulatory approval from the National Futures Association.
The company's expansion extends beyond the U.S., with Ireland chosen as its primary regulatory base in the EU. It has submitted an application for a single Markets in Crypto-Assets (MiCA) license in Ireland, aiming to obtain it by December 2024 when the MiCA rules are expected to be fully implemented. Additionally, Coinbase recently secured a virtual asset service provider license in France, enabling it to offer custody and trading services for crypto assets in the country.
As Coinbase navigates regulatory challenges, this latest move underscores its commitment to providing a comprehensive suite of services to a global clientele in an evolving cryptocurrency landscape.