In a significant move, Coinbase (NASDAQ:COIN), the largest cryptocurrency exchange in the U.S., announced on Thursday that it has received regulatory approval from Bermuda's financial regulator to allow non-U.S. retail traders to buy and sell perpetual futures. This decision comes as part of the company's ongoing efforts to expand its footprint beyond the U.S., where it has faced increasing regulatory scrutiny.
The announcement means that small-time investors will now be able to apply to trade these risky financial products, which allow speculation on the future price of an asset. Trading is expected to begin in the coming weeks, according to a blog post by Coinbase on Thursday.
This development follows the collapse of rival exchange FTX and the arrest of its CEO, Sam Bankman-Fried. In response, the U.S. Securities and Exchange Commission (SEC) has increased its scrutiny on several high-profile crypto companies and founders, including Genesis, Gemini, Justin Sun of TRON, and Do Kwon of TerraUSD.
Coinbase itself has not been immune to this scrutiny. In March, the exchange revealed it had received a Wells Notice from the SEC, indicating impending litigation. Despite this, in May, Coinbase launched its International Exchange for institutional investors after receiving regulatory approval in Bermuda.
However, even with an outright lawsuit filed by the SEC in June, billions of dollars of crypto have continued to flow through both Coinbase's domestic and offshore entities. As of the second quarter of 2023, its Bermuda outpost reported $5.5 billion in trading volume strictly from institutional investors.
Coinbase International Exchange is a class F license holder from the Bermuda Monetary Authority (BMA) first launched in May 2023 offering crypto derivates services to institutional clients. With this latest approval, eligible customers will gain access to regulated perpetual futures contracts on the Coinbase Advanced platform.
Coinbase claims that nearly 75% of crypto trading volume comes from the derivatives market. This new regulatory approval will allow retail traders to access the crypto derivatives market, which has been primarily dominated by institutions.
The platform also emphasized that Coinbase does not engage in market making and that liquidity on its exchanges is provided by established, independent liquidity providers who have undergone thorough compliance reviews.
Only non-U.S. consumers in certain countries can use Coinbase International Exchange. These customers will be assessed for their eligibility for this product before they can open a Coinbase Advanced trading account. This approval comes just a month after the platform received approval from the National Futures Association (NFA) to offer investments in crypto futures to eligible institutional clients in the United States.
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