Coinbase sets derivatives exchange on Bermudas

The company has obtained a license from the Bermuda Monetary Authority amid a regulatory crackdown on the crypto industry in the US.

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In its Wednesday blog post, Coinbase announced that it received a license to operate in the offshore jurisdiction of Bermuda, signaling that the company is ready to relocate from the US to another country with more favorable crypto regulations.

The Class F License (where F stands for full) under the Digital Asset Business Act from the Bermuda Monetary Authority allows Coinbase to operate as a regulated digital asset business in the country. This type of license does not have an expiration date; however, it is subject to regular supervisory visits by the BMA FinTech supervisory unit, Anti-Money Laundering unit, and Cyber Risk unit.

“Bermuda was one of the first financial centers to pass comprehensive digital assets regulation in 2018, and its regulatory environment is long known for a high level of rigor, transparency, compliance, and cooperation,” Coinbase said in its blog post. “Bermuda was chosen as one of our international hubs, as the BMA is a highly respected and experienced financial regulator that is led by a world-class executive team and board of directors.”

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Fortune stated that the exchange could be launched as soon as next week, citing a person close to the company. Earlier in March, The Block reported that perpetual swaps — a type of futures contract that has no expiration date and is commonly used by cryptocurrency traders — will be among the offerings of the new offshore trading platform.

In the United States, perpetual contracts trading isn’t authorized by the Commodity Futures Trading Commission, so the exchanges that offer this type of derivative are inaccessible to the US investors. Coinbase's expansion overseas would enable it to more directly compete with Binance, the behemoth of crypto exchanges that generates roughly 10 times bigger trading volume than Coinbase.

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The announcement about the license comes just a day after Coinbase CEO Brian Armstrong hinted that his company could quit the US if the regulatory climate doesn’t improve.

"I think if a number of years go by where we don’t see regulatory clarity emerge in the US, we may have to consider investing more in other regions of the world," Armstrong said when speaking at the Fintech Week in London.

“Anything is on the table, including relocating or whatever is necessary,” he added regarding a potential exit from the US.

Besides Bermudas, Coinbase is also exploring other crypto-friendly jurisdictions as its primary place of business, including Hong Kong, Dubai, and Singapore. In the same blog post, the company announced the launch of a “full crypto experience” in Brazil, the new Country Director hire to oversee the Canadian market, and praised the European Parliament’s adoption of the landmark crypto regulation MiCA, saying that the EU “is recognising the potential and societal promise that emerging technology can provide.”

“Our approach globally will be consistent with our approach in the United States: we will work with governments and regulators in different markets, and will always aim to be the most trusted and compliant crypto company in any market,” the exchange concluded, adding that regulation by enforcement trend in the US is “leading to a disappointing trend for crypto development” in the country.