Announcing Coinbase International Exchange
Coinbase, a US crypto asset (virtual currency) exchange, announced on the 2nd that it will launch Coinbase International Exchange, a derivative exchange for the offshore market. It will be the first to offer perpetual futures contracts for Bitcoin (BTC) and Ethereum (ETH), offering up to 5x leverage trading.
Coinbase International Exchange was founded in Bermuda. The release didn’t mention specific countries it will serve, but said it would serve “institutional investors based in eligible jurisdictions other than the United States” at launch.
A perpetual futures contract, also known as a perpetual swap, is a type of futures contract. Unlike conventional futures trading, it is an investment contract that does not set a deadline. According to Coinbase, about 75% of the cryptocurrency trading volume in 2022 will be perpetual futures, which are highly liquid and offer traders more diverse trading strategies.
Coinbase International Exchange emphasizes working with the Bermuda Monetary Authority (BMA) to establish a regulatory environment of high transparency, compliance and cooperation.
The new platform claims to have liquidity provided by external market makers, dynamic margin requirements and collateral valuations, and a clearing framework that meets stringent compliance standards.
What is an offshore derivatives exchange?
Offshore exchanges are exchanges that handle derivatives (financial derivative products) that exist in overseas jurisdictions. There is also a view that they are often established in places where regulations are lax.
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U.S. Virtual Currency Regulation
The move comes amid a dispute with the U.S. Securities and Exchange Commission (SEC) over regulatory interpretation. In a release, Coinbase argued that while other countries are aggressively developing cryptocurrency regulations, the United States should take a similar approach and “establish itself as a cryptocurrency hub.”
Meanwhile, in April, the SEC sued U.S. cryptocurrency exchange Bittrex for providing securities trading, brokerage and clearing services without a business registration. The move reinforced speculation that Coinbase might be the next to be sued.
Coinbase also received a “Wells Notice” from the SEC in March, an official letter formalizing that it intends to take legal action. In response, the company’s CEO Brian Armstrong argued that the regulation needed to be clarified and proved unfair in court.
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To deal with such regulatory uncertainty, U.S. cryptocurrency companies are venturing into offshore markets. On April 21, US-based cryptocurrency exchange Gemini announced the global version of the cryptocurrency derivatives trading platform, Gemini Foundation.
The Gemini Foundation targets international financial markets with less regulatory uncertainty compared to domestic financial markets in the United States. The platform is intended to serve as an offshore marketplace for trading and wealth management, primarily for those living outside the United States.
It does not accept investors from the US, EU, Japan, or China, and covers 30 countries, including Singapore, Hong Kong, India, Argentina, Bahamas, Bermuda, and the British Virgin Islands.
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