TL; DR
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Derivatives in cryptocurrency are the same as in traditional markets: a financial product that ‘derives’ its value from something, without actually being that thing.
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Players like Binance, OKX, Bybit and Deribit have taken the lead in derivatives in the global trading market, and Coinbase wanted a piece…
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Therefore, they acquired a MiFID II licensed entity in Cyprus, allowing Coinbase to offer cryptocurrency-based derivatives in Europe and play in the global derivatives market.
Full story
One of the first things they teach you in business school? When you’re the boss, your job is to hire people who do things better than you.
At least, we assume they teach you that (we wouldn’t know).
The point is, if you’re the CEO and you need legal work, hire a lawyer.
And this is exactly what Coinbase does, but with derivatives.
Save explanation…
Derivatives in cryptocurrency are the same as in traditional markets:
A financial product that ‘derives’ its value from something, without that actually being the case being that thing.
For example, a futures contract on Bitcoin is a “derivative,” in the sense that it is a bet on Bitcoin future price of Bitcoin, but is not Bitcoin itself.
That’s like betting on a sports team…
Actually, it’s not like you own the sports team when you place a bet you are just predicting whether they will win or lose.
And in the Crypto world, 75% of all crypto transactions are derivatives – meaning there is a lot of money to be made in supporting derivatives transactions.
Players like Binance, OKX, Bybit and Deribit have taken the lead in derivatives in the global trading market, and Coinbase wanted a piece…
So this is where Coinbase’s new ‘rental’ comes in handy:
Coinbase has been vocal about pursuing global growth – and with an ever-changing regulatory landscape in the EU, they should have waited for a license to sell derivatives.
So instead they ‘hired’ a MiFID II licensed entity in Cyprus.
This allows Coinbase to offer cryptocurrency-based derivatives in Europe and play in the global derivatives market.
The purchase still needs to be approved by regulators, but this option will help them get into the game without having to learn all the processes from scratch.
Smart!