Coinbase launches offshore derivatives exchange in Bermuda
Coinbase, a publicly traded company based in the United States, has launched its international derivatives exchange in Bermuda amid a deepening regulatory crackdown at home.
The launch comes less than two weeks after the company received regulatory approval from the Bermuda Monetary Authority as part of an aggressive expansion outside the United States.
After unveiling the plan in March, Coinbase announced the move on Tuesday, joining other prominent US-based firms that have already taken their business elsewhere due to an increasingly hostile regulatory environment.
The offshore entity, called Coinbase International Exchange, will allow users outside the US to trade on both spot and derivatives markets. Bitcoin and Ether perpetual contracts will be initially introduced as its first derivative contracts, but other products are expected to launch soon afterwards.
A perpetual contract is a type of futures contract that does not have an expiry date. Instead, it is designed to be held indefinitely, as long as both parties meet their margin requirements. Perpetual contracts are commonly used in cryptocurrency trading and are similar to traditional futures contracts, but without an expiration date.
“Rest assured that Coinbase is committed to the U.S., but countries around the world are increasingly moving forward with responsible crypto-forward regulatory frameworks to strategically position themselves as crypto hubs. We would like to see the U.S. take a similar approach,” Coinbase wrote.
Coinbase International will initially cater to market makers and institutional clients, offering up to five times leverage while trades will settle in the USDC, the stablecoin pegged to the US dollar that was developed in concert with Circle.
The US exchanges’ expansion comes at a tumultuous time as US regulators set their sights on the industry due to the recent catastrophic incidents, including downfall of FTX. Furthermore, US crypto-friendly banks, such as Silvergate and Signature Bank, fell into bankruptcy after running into financial troubles.
Crypto derivatives, which are popular on overseas exchanges like Binance, allow traders to place leveraged bets on whether digital assets will rise or fall. Such products are mostly banned for retail investors in the US due to investor-protection requirements, AML rules and safeguards against market manipulation.
