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Coinbase Launches Crypto-Derivatives Exchange in Bermuda Amid Regulatory Uncertainty in the US

Credit: Marco Verch Professional Photographer

Fri, 05 May 2023, 13:31 pm UTC

Coinbase Global, the parent company of the largest crypto exchange in the US, has launched a new crypto-derivatives exchange in Bermuda. The move comes amid a lack of regulatory certainty in the US, and the exchange will allow qualified institutional clients outside the US to trade crypto perpetual futures.

These are a type of derivative contract that has no expiration date and is not regulated by the US Commodities Futures Trading Commission (CFTC). Coinbase's perpetual contracts will offer up to 5x leverage and be settled in USD Coin (USDC), a stablecoin backed by Circle. Coinbase said the international exchange would provide more opportunities and liquidity for its clients and foster innovation and growth in the global crypto ecosystem.

Initially, Coinbase International Exchange will only be accessible via API, meaning it will not have a dedicated app or website for users. The launch comes at a time when various crypto exchanges and services are facing increased regulatory scrutiny and uncertainty in the US. Coinbase recently filed a lawsuit against the US Securities and Exchange Commission in an effort to gain more regulatory clarity regarding the exchange's operations in the country.

Coinbase's move into Bermuda is part of a growing trend of crypto firms looking for more favorable regulatory environments abroad. Bermuda has been positioning itself as a hub for blockchain and crypto businesses, with a regulatory framework that is seen as more welcoming than that of the United States.

Despite the regulatory uncertainty in the US, Coinbase's new international exchange has reportedly been met with excitement by institutional clients. According to a company spokesperson, there has been strong demand from clients for access to perpetual futures contracts, which are not currently offered on Coinbase's US platform.

Coinbase's move into derivatives trading follows a trend among other crypto exchanges, including Binance, FTX, and BitMEX, which have all launched derivatives platforms in recent years. However, many of these exchanges have faced regulatory scrutiny and legal challenges.

In its efforts to provide greater clarity around its operations, Coinbase recently filed a lawsuit against the US Securities and Exchange Commission (SEC) over the regulator's plans to regulate the exchange's lending product, which Coinbase argues is not a security.

Coinbase has also been dealing with other legal challenges, including allegations of insider trading and privacy violations related to the collection of biometric data. Despite these challenges, Coinbase remains one of the largest and most influential crypto companies in the world, with a market capitalization of over $50 billion.

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