Offshore cryptocurrency derivative trading expands with Coinbase's innovative venture
In a move aimed at fostering innovation and growth in the global crypto ecosystem, Coinbase, the American cryptocurrency exchange, has established Coinbase International Exchange, an offshore crypto-derivatives market situated in Bermuda.
The new exchange will offer perpetual futures trading for Bitcoin and Ethereum, a product that has gained significant traction in the crypto world. Unlike traditional futures contracts, these perpetual futures have no expiration date. The settlement for the trading will be in USD Coin (USDC), Circle's stablecoin.
The decision to open an overseas exchange comes amidst increased regulatory scrutiny and uncertainty in the US cryptocurrency business. Coinbase is not alone in this move; other platforms such as Bittrex and Binance have also moved some of their operations to more crypto-friendly jurisdictions due to regulatory challenges.
The international exchange will initially be available only through API, and the leverage for the perpetual futures trading will be up to 5x. Notably, the exchange will allow non-US institutional traders to trade in crypto perpetual futures.
Coinbase CEO Brian Armstrong has previously expressed frustration with US authorities and warned that the business may relocate if the situation does not change. This sentiment is reflected in the decision to set up shop in Bermuda, where Coinbase holds a business license.
It's worth mentioning that the US Commodity Futures Trading Commission (CFTC) does not oversee crypto perpetual futures. As a result, these types of trading are not permitted in the US market. However, Coinbase's move is primarily targeted at institutional clients, with retail investors expected to follow later through partner platforms.
Perpetual futures trading accounted for about 75% of worldwide crypto exchange traffic in 2022, according to Coinbase. This new development is expected to bring more possibilities and liquidity to Coinbase's clients, encouraging further growth in the global crypto ecosystem.
In conclusion, Coinbase's foray into the international crypto derivatives market signifies a strategic move to navigate regulatory challenges and tap into the growing demand for perpetual futures trading. As the crypto landscape continues to evolve, it will be interesting to see how this decision shapes the future of Coinbase and the broader crypto ecosystem.
