Coinbase Global, the parent company of the largest crypto exchange in the United States, has opened a new international exchange in Bermuda to trade products, such as crypto perpetual futures, that are not permitted in the U.S. due to regulatory uncertainty. The new exchange will enable qualified institutional clients outside the U.S. to trade crypto perpetual futures, which are derivative contracts without an expiration date.
Regulatory Hurdles in the U.S.
The Commodities Futures Trading Commission (CFTC) does not oversee cryptocurrency perpetual futures trading in the U.S., and exchanges that offer the product are typically not registered with the CFTC. The regulator has taken action against multiple crypto platforms, including Binance, for offering perpetual contracts.
Coinbase’s Perpetual Contracts Features
Coinbase’s perpetual contracts will provide up to 5x leverage and will be settled in USD Coin (USDC), a stablecoin backed by Circle. The international exchange is intended to offer more opportunities and liquidity for clients and foster innovation and growth in the global crypto ecosystem. According to Coinbase, perpetual futures trading represented around 75% of worldwide crypto exchange volume in 2022. Initially, Coinbase International Exchange will be accessible only via API, without a dedicated app or website for users. Bitcoin and Ethereum perpetual futures started trading on Coinbase International Exchange early on Tuesday.
Also Read: Coinbase Receives License to Operate in Bermuda, Plans Derivatives Exchange
Offshore Expansion Amid Regulatory Struggles
Coinbase’s offshore expansion follows increased regulatory scrutiny and uncertainty in the U.S. that has affected various crypto exchanges and services, such as Bittrex and Binance. Bittrex shut down its operations in the U.S. due to the regulatory climate. Coinbase CEO Brian Armstrong has voiced his frustration with U.S. regulators and suggested the possibility of relocating the company if the situation does not improve, pointing to a lack of clear and consistent rules for the sector.
While Coinbase’s announcement highlights the “disappointing trend” of the U.S. regulatory environment, the Bermuda move is being described as an “expansion” rather than a departure. Coinbase has filed a lawsuit against the U.S. Securities and Exchange Commission for more regulatory clarity regarding the exchange’s operations in the country and recently published a video response to the Wells Notice they received from the SEC earlier this year.
