Coinbase Launches Offshore Crypto-Derivatives Exchange

Brian Armstrong, cofounder and CEO of Coinbase speaks onstage during 'Tales from the Crypto: What the Currency of the Future Means for You' at Vanity Fair's 6th Annual New Establishment Summit at Wallis Annenberg Center for the Performing Arts on October 23, 2019 in Beverly Hills, California.

Matt Winkelmeyer/Getty Images

Coinbase Global (COIN), the parent company of the largest crypto exchange in the United States, launched a new crypto-derivatives exchange in Bermuda, to trade products that aren't allowed in the U.S. amid a lack of regulatory certainty.

Key Takeaways

  • Coinbase has opened a new, international exchange for trading crypto perpetual futures in Bermuda.
  • Perpetual futures are derivative contracts without an expiration date and aren't allowed in the U.S.
  • Coinbase's offering is only for institutional investors outside of the United States via an API.
  • For now, the exchange offers perpetual futures trading for Bitcoin and Ether with up to 5x leverage.
  • Coinbase is the latest in the list of crypto exchanges looking offshore for expansion as the regulatory environment in the U.S. is viewed as unfavorable by the industry.

Coinbase's new exchange will allow qualified institutional clients outside of the United States to trade crypto perpetual futures—a type of derivative contract that has no expiration date.

The Commodities Futures Trading Commission (CFTC) does not regulate trading of cryptocurrency perpetual futures in the U.S., and typically exchanges that offer the product aren't registered with the CFTC. The regulator has cracked down on multiple crypto platforms, including Binance, for offering perpetual contracts.

Coinbase's perpetual contracts will offer up to 5x leverage and will be settled in USD Coin (USDC), a stablecoin backed by Circle.

Coinbase said the international exchange will provide more opportunities and liquidity for its clients, as well as foster innovation and growth in the global crypto ecosystem.

According to the crypto exchange giant, perpetual futures trading accounted for roughly 75% of global crypto exchange volume in 2022. Coinbase International Exchange will initially be accessible only via API, meaning that it will not have a dedicated app or website for users.

Bitcoin and Ethereum perpetual futures were listed for trade on Coinbase International Exchange early on Tuesday.

Offshore Move Follows Regulatory Fight

The launch of the Coinbase International Exchange comes at a time when various crypto exchanges and services, such as Bittrex and Binance, are facing increased regulatory scrutiny and uncertainty in the U.S. Bittrex wound down its operations in the country due to the regulatory climate.

Coinbase CEO Brian Armstrong has also expressed his frustration with the U.S. regulators and previously hinted at the possibility of relocating the company if the situation does not improve, citing the lack of clear and consistent rules for the sector.

While Coinbase's announcement regarding their new exchange underscores the current regulatory environment in the United States as "a disappointing trend," the move into Bermuda is being labeled an "expansion" rather than a departure from the U.S.

Coinbase recently filed a lawsuit against the U.S. Securities and Exchange Commission in an effort to gain more regulatory clarity regarding the exchange's operations in the country. And last week, Coinbase published a video response to the Wells Notice they received from the SEC earlier this year.

Notably, Coinbase and its executives have also been hit with two new lawsuits this week. The exchange is accused of privacy violations related to the collection of biometric data in Illinois and some of its executives and other insiders allegedly sold stock based on insider information prior to its public listing in April 2021.

Coinbase reports its first quarter earnings on May 4.

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  2. CFTC. "Who Trades Bitcoin Futures and Why?"

  3. CFTC. "CFTC Charges Binance and Its Founder, Changpeng Zhao, with Willful Evasion of Federal Law and Operating an Illegal Digital Asset Derivatives Exchange-Download Complaint."

  4. Coinbase. "Coinbase takes another formal step to seek regulatory clarity from SEC for the crypto industry."

  5. Court Listener. "Massel v. Coinbase, Inc. Complaint."

  6. Bloomberg. "Coinbase Insiders Sued for Dumping Stock, Saving $1 Billion."

  7. Coinbase. "Coinbase Announces Date of First Quarter 2023 Financial Results."

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