To
expand global crypto derivatives offerings, Coinbase considered the acquisition
of FTX’s European entity following FTX’s bankruptcy in November. The
discussions did not progress to an advanced stage. However, this move
highlights Coinbase’s growing emphasis on derivatives.
Derivatives
are complex financial instruments. These are based on the value of underlying
assets such as Bitcoin and Ether. They have gained substantial prominence
within the crypto industry.
Derivatives
trading has been more popular than spot trading. According to data from crypto
analytics firm Kaiko Research, in the second quarter of 2023, derivatives
trading volumes were six times larger than spot trading volumes.
Coinbase,
like other major U.S.-based firms such as Gemini, has ventured into offshore
exchanges to focus on Asian markets. The regulatory restrictions in the U.S.
have stalled the growth of derivatives trading. In August, Coinbase received
approval to offer crypto futures to its U.S. customers. It is planned for a
rollout shortly.
Europe
remains a region with uncertainties surrounding crypto derivatives because of
the introduction of new regulations. Until the collapse of FTX in November, FTX
Europe was the sole provider of a popular form of crypto derivatives known as
perpetual futures, or “perps,” in the European market.
This
was made possible through a crucial regulatory license obtained in Cyprus. FTX
initially acquired FTX Europe for $376 million in late 2021.
Financial
documents of FTX Europe reveal that the platform continued to attract tens of
thousands of users until the bankruptcy of its parent company. The enduring
value of its license could only be transferred as part of an acquisition. This
drew interest from various potential buyers. Among them were Crypto.com and FTX
FDM.
Coinbase
has also expressed interest in FTX Europe. An executive from Coinbase’s
European operations inquired about the possibility of an acquisition. Both came
shortly after FTX’s bankruptcy in November 2022 and September 2023. However, it has been reported
that Coinbase is no longer actively pursuing this potential deal.
Coinbase’s
Ongoing Business Expansion Strategy
Coinbase
has previously made acquisitions in the derivatives space such as the futures
exchange FairX in January 2022. A Coinbase spokesperson stated, “We’re
always evaluating opportunities to strategically expand our business and meet
with many teams around the world.”
FTX
Europe has become a focal point in the…
