Coinbase Receives Approval for Retail Futures Trading from Bermuda Regulator

In a notable development, Coinbase, the largest cryptocurrency exchange in the United States, announced on Thursday that it has received regulatory approval from Bermuda’s financial authority to enable non-U.S. retail traders to engage in buying and selling perpetual futures. This move is part of the company’s strategy to broaden its presence outside the U.S., where it has encountered heightened regulatory challenges.

With this approval, smaller investors can now apply to trade these speculative financial products, which allow traders to bet on the future price movements of assets. According to a company blog post, trading is anticipated to commence in the coming weeks.

This announcement follows the downfall of competitor FTX and the subsequent arrest of its CEO, Sam Bankman-Fried. In light of these events, the U.S. Securities and Exchange Commission (SEC) has intensified its examination of several prominent cryptocurrency firms and their founders, including Genesis, Gemini, Justin Sun of TRON, and Do Kwon of TerraUSD.

Coinbase has also been subject to this increased scrutiny. In March, the exchange disclosed that it had received a Wells Notice from the SEC, signaling the possibility of legal action. Nonetheless, in May, Coinbase launched its International Exchange for institutional investors after obtaining regulatory approval in Bermuda.

Despite an SEC lawsuit filed in June, significant volumes of cryptocurrency have continued to be traded through both Coinbase’s domestic and offshore entities. By the second quarter of 2023, its Bermuda operation reported $5.5 billion in trading volume exclusively from institutional clients.

The Coinbase International Exchange holds a class F license from the Bermuda Monetary Authority and began operations in May 2023, providing crypto derivatives services to institutional users. With the new regulatory approval, eligible users can now access regulated perpetual futures contracts via the Coinbase Advanced platform.

Coinbase asserts that nearly 75% of cryptocurrency trading volume is derived from the derivatives market. This recent approval will enable retail traders to tap into the crypto derivatives sector, which has predominantly been served by institutional investors.

The platform has also stated that it does not participate in market making, and that liquidity on its exchanges is provided by established independent liquidity providers, all of whom have undergone thorough compliance checks.

Only non-U.S. consumers from select countries will be permitted to use the Coinbase International Exchange. These customers will undergo an eligibility assessment before they are allowed to set up a Coinbase Advanced trading account. This approval arrives just a month after the platform secured authorization from the National Futures Association to offer investments in crypto futures to qualified institutional clients in the United States.