Gemini to launch overseas derivative exchange amid US crackdown
Gemini, the cryptocurrency exchange founded by the Winklevoss twins, is reportedly developing an international derivative trading platform in response to a US domestic crackdown on crypto assets.
According to a new report from The Information, sources familiar with the matter say that Gemini is considering whether to launch perpetual futures, a type of crypto derivatives with somewhat risky nature.
Crypto derivatives 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.
The American exchange is looking to international markets to drive growth amid fears of a looming clampdown on crypto businesses in the US.
The sources say that Gemini is currently discussing the possibility of setting up an overseas platform for global customers and that it has been in search of market makers to support its operations over the last few months.
Rival exchange Coinbase is also planning to launch a new platform overseas as part of an aggressive expansion outside the United States. However, the nature of Coinbase’s overseas operations, or where it would be located, remains unclear. But the exchange already has an active presence in the UK, Ireland, Germany, Spain, Italy, France, the Netherlands and Switzerland.
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 the bankruptcy after running into financial troubles.
Gemini is being sued by investors over the sale of its interest-bearing crypto products. The complaint alleges that Gemini’s Earn program didn’t register its high-yield products as securities in accordance with U.S. securities law. The exchange promoted annual interest rates of up to 7.4% on crypto deposits, which was higher than rates for short-term, investment-grade, fixed-income securities or bank savings accounts.
Nevertheless, Gemini reached an agreement with bankrupt crypto lender Genesis and its parent company Digital Currency Group that includes a viable restructuring plan. The agreement will see Barry Silbert-owned DCG exchange its outstanding $1.1 billion note due in 2023 for convertible preferred stock.
The deal is part of Genesis’ bankruptcy plan agreed with its creditors that entails DCG refinancing its current 2023 term loans through new term loans issued in two tranches with an aggregate total value of approximately $500 million. Additionally, Gemini will contribute up to $100 million to compensate Earn users with frozen assets and ensure that they will fully recover their funds.
