US cryptocurrency exchange Coinbase is making strategic moves to introduce crypto-linked derivatives in the European Union (EU) by acquiring a company with a license to do so.

Coinbase told CNBC it entered a deal to purchase an unnamed holding company with a license of MiFID II, the EU's revised rules governing financial instruments. It was updated in 2017 to address criticisms of being too focused on stocks, neglecting other asset classes such as fixed income, derivatives, and currencies.

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SAN ANSELMO, CALIFORNIA - JUNE 06: In this photo illustration, the Coinbase logo is displayed on a screen on June 06, 2023 in San Anselmo, California.

Coinbase Eyes for Crypto Derivatives in the EU

Coinbase's purchase of the unnamed holding company, subject to regulatory approval and expected to close in 2024, is pivotal for the company's ambition to provide regulated derivatives trading in the EU.

This strategic move aligns with Coinbase's longstanding goal of catering to professional and institutional clients. The cryptocurrency exchange, in operation for 12 years, has been aiming to expand its offerings to institutions and benefit from the larger transaction sizes typical of these clients.  

The company already provides spot trading in various cryptocurrencies, and the acquisition would mark its entry into the EU derivatives market.

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MiFID II License

The MiFID II license obtained through this acquisition will enable Coinbase to offer regulated derivatives such as futures and options in the EU. 

While the company expressed its commitment to maintaining high compliance standards, including measures against money laundering, customer transparency, and adherence to sanctions, it emphasized the importance of achieving its Five-point Global Compliance Standard before operationalizing the license or serving users. 

"We have a long road ahead before finalizing the acquisition and operationalizing the EU MiFID licensed entity, but this is an exciting step forward in our efforts to expand access to our international derivatives offerings and bring a more global and open financial system to 1 billion people around the world," Coinbase wrote in a blog post. 

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