On Tuesday, crypto exchange Coinbase made its international expansion by launching a derivatives exchange called Coinbase International Exchange in Bermuda. This move came as the company faced regulatory challenges in the United States.
The exchange aims to provide institutional clients access to digital assets and offer Bitcoin and Ethereum perpetual futures. Speaking to Decrypt via email, head of Coinbase International Exchange Emmanuel Goh said that the exchange launch is part of the company’s global expansion plans that were first announced in May 2022.
In March, a representative from Coinbase told Decrypt that the international expansion would prioritize regulatory jurisdictions with high standards. They also emphasized the company’s commitment to providing Coinbase’s products securely and competently, focusing on sound risk management.
It’s official! Coinbase International Exchange is here. Institutional traders in eligible non-US jurisdictions now have access to trade perpetual futures settled in USDC with up to 5x leverage.
— Coinbase International Exchange 🛡️ (@CoinbaseIntExch) May 2, 2023
Qualified institutional clients outside the U.S. can trade cryptocurrency perpetual futures on Coinbase’s new exchange. These futures contracts have no expiration date and are a type of derivative contract.
Coinbase International Exchange allows traders to speculate on the price of Bitcoin and ether using perpetual futures contracts with leverage of up to five times. All trades on this platform will be settled in the stablecoin USDC.
The Commodities Futures Trading Commission (CFTC) does not regulate cryptocurrency perpetual futures in the U.S., and exchanges offering this product are typically not registered with the CFTC. Despite this, the CFTC has cracked down on multiple crypto platforms that have provided perpetual contracts, such as Binance.
Coinbase also said the new international exchange would create additional customer opportunities and liquidity. It would support innovation and growth in the global cryptocurrency ecosystem.
Users will not be able to access Coinbase International Exchange through a dedicated app or website, as it will only be accessible via an API.
Coinbase’s launch of the International Exchange coincides with increased regulatory scrutiny and uncertainty for prominent cryptocurrency exchanges and services such as Bittrex, Binance, Kraken, Genesis and Gemini.
As a result of legal actions and warnings by regulators, crypto firms in the U.S. are seeking more hospitable destinations such as Hong Kong, Dubai and Singapore.
On Tuesday, Cameron and Tyler Winklevoss, who gained notoriety for their involvement in Facebook’s launch and founded the crypto exchange Gemini, revealed plans to establish their own global exchange in Singapore.
1/ We’re thrilled to announce that Gemini Foundation’s derivatives platform is now live with our BTC/GUSD perpetual contract trading across 30 countries. https://t.co/NyQLKhsZYt
— Gemini (@Gemini) May 2, 2023
According to a report by Bloomberg in March, Coinbase contacted institutional investors to explore the possibility of establishing a crypto exchange overseas. Later, The Block reported that the exchange would offer perpetual swaps, a futures contract.
Just a day before Coinbase announced regulatory approval in Bermuda, CEO Brian Armstrong warned at a conference that crypto companies would relocate to offshore locations if the U.S. and the U.K. failed to implement clear regulatory guidelines for cryptocurrencies.
In a blog post, Coinbase emphasized its commitment to the States but acknowledged that other countries are taking the lead in establishing regulatory frameworks favorable to the cryptocurrency industry.
The company hoped to see the U.S. adopt a similar approach. However, the current enforcement-based regulation in the country has harmed the development of the country’s cryptocurrency market, according to Coinbase.
Intermediaries for investment contracts are required to comply with securities laws & register with @SECGov.
Instead, many crypto platforms are contending that their investment contracts are something else.
The law cares about what something actually is, not what you call it.
— Gary Gensler (@GaryGensler) April 27, 2023
Coinbase took steps to seek better regulatory guidance for its activities in the U.S. The company filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) and, more recently, posted a video response to the Wells Notice it had received from the SEC earlier in the year.
The crypto exchange giant and its executives are facing two separate lawsuits this week. The first lawsuit alleges that the exchange violated privacy laws in Illinois by collecting biometric data. The second lawsuit claims that some of the company’s insiders and executives sold shares based on inside information before its public listing in April 2021.