American Coinbase to acquire Cypriot firm for MiFID II licence

America’s largest cryptocurrency exchange, Coinbase, has set its sights on the European Union’s derivatives market and plans to acquire a Cyprus-based entity that holds a MiFID II licence, the company said on in a blog on its website.

This licence is crucial under the EU’s rules for financial markets, updated in 2017 to include various asset classes like derivatives, in addition to stocks. It also obviates the need for Coinbase to navigate through the bureaucratic maze of securing individual permissions in each EU state.

“As part of our global expansion, we’re in the process of acquiring a European Union MiFID (Markets in Financial Instruments Directive) licensed entity based in Cyprus that would increase access to our derivatives products by letting us offer them to eligible customers in select countries across the EU,” Coinbase said in the blog. “The EU’s MiFID is one of the world’s most highly regarded licensing regimes governing investment services and activities. MiFID has established a comprehensive single rulebook across the EU and is a central pillar in the EU’s Capital Markets Union strategy.”

Adding such a licence to its international portfolio, it added, would further support the strong interest it has seen in its derivatives offerings and help it capture more of the 75% of the global crypto market claimed by derivatives.

The move is a significant step for the company, which already provides spot trading in Bitcoin and other cryptocurrencies.

Coinbase will be entering a market with strong competition from established players like Binance and OKX.

Previously, in October 2023, Coinbase chose Ireland as its main base in the EU. This was in preparation for the upcoming Markets in Crypto-Assets Regulations (MiCA). The company has applied for a MiCA licence, hoping to get it by the end of 2024 when the EU fully implements these rules.

Additionally, in December, Coinbase secured a license in France to offer crypto asset custody and trading services. This is part of its broader strategy to strengthen its position in the international cryptocurrency market.

Acquiring these European approvals would be a crucial milestone for Coinbase. With the MiCA license under its belt, the crypto exchange can “passport” its array of services to several European nations, including major markets like Germany, France, Italy, and the Netherlands.

The implementation of MiCA in 2024 is eagerly anticipated as it offers a singular regulatory structure spanning 27 countries and catering to around 450 million individuals. Such a unified framework, overseen by a sole national supervisor, promises to simplify business operations for firms like Coinbase.