Coinbase Global Inc. plans to expand its business by launching a derivatives exchange catering to institutional crypto traders based outside the US. The newly launched platform, named Coinbase International Exchange, will list perpetual futures for Bitcoin and Ether from this week after obtaining a license from the Bermuda Monetary Authority.
The move will allow Coinbase to compete with offshore players like Binance, who have already established a strong foothold in the crypto derivatives market. For now, the international exchange will only be available in Bermuda and for non-US institutional clients upon application.
Coinbase is doubling down on international expansion at a time when the blockchain industry faces increased regulatory challenges in the US. Coinbase received a Wells Notice from the SEC earlier this year alleging possible securities violations despite its consistent efforts to engage with US regulators and seek regulatory clarity for the cryptocurrency industry. These efforts culminated last week in Coinbase initiating administrative proceedings against the SEC seeking a response to a Petition which it lodged last year calling on the SEC to exercise its rulemaking powers to establish a tailored regime for digital asset securities.
According to Coinbase, perpetual futures make up 75% of global crypto trading volumes. Perpetual futures offer a way for investors to gain exposure to cryptocurrency without needing to own the underlying asset. Crypto traders often use perpetual futures to hedge against losses or speculate on the underlying tokens' prices using leverage. These contracts do not have an expiration date and can be held for as long as the investor wishes.
On the Coinbase International Exchange, eligible investors will be able to access perpetual futures contracts with up to five times leverage. All trades will be settled using USD Coin ($USDC), the stablecoin issued by Circle Internet Financial Ltd., in partnership with Coinbase.
In a recent blog post, Coinbase reaffirmed its commitment to the US market but criticized the country's regulatory approach, calling it a "disappointing trend." The company generated 84% of its revenue from the US market last year, where it is most recognized. With rumors that a number of other US based exchanges have received Wells Notices, it appears likely that major exchanges will continue to pursue growth internationally as other jurisdictions, such as the EU, UK, Hong Kong and Australia, move forward with fit for purpose regulatory regimes for crypto-assets.