As the largest US-based cryptocurrency company, Coinbase has been advocating for comprehensive regulation of the industry in the United States for years. In response to the hostile attitude of some authorities, Coinbase is now launching a derivatives exchange outside the US.
The regulatory environment for crypto companies in the United States has drastically tightened over the past few months. Specifically, the Securities and Exchange Commission (SEC) has been initiating new legal proceedings against leading industry players such as Coinbase, Kraken, and Binance on almost a weekly basis. Despite repeated requests from US companies, the agency led by former investment banker Gary Gensler has refrained from defining clear guidelines. With the largest cryptocurrency exchange opening a trading platform exclusive to non-US customers, the US risks losing significant industry players.
Derivatives platform with an international focus
With over 68 million verified users and hundreds of billions of dollars in annual trading volume, Coinbase is one of the most important players in the cryptocurrency industry. The international derivatives platform expands the services of the cryptocurrency exchange to allow institutional users outside the US to trade futures contracts. According to the company, futures were responsible for almost 75% of the global crypto volume in 2022, making them highly liquid and offering traders greater flexibility in their trading strategies.
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While Coinbase continues to focus on the US market, there is a growing trend among countries around the world to introduce responsible regulatory frameworks for crypto services. In the US, however, regulations based on enforcement actions have led to a disappointing environment for the development of cryptocurrencies, according to the announcement of the derivatives exchange. The new platform, based in the island territory of Bermuda, represents the first major move of the US company into the international market. At the same time, the US crypto exchange Gemini also announced its expansion outside the United States.
No clear regulatory framework in the US
The decision by the cryptocurrency exchange follows a legal dispute with the SEC, which initiated an enforcement action ("Wells Notice") at the end of March. The SEC's Wells Notice questioned specific services. The agency classified some tradable cryptocurrencies, Coinbase Earn, Coinbase Prime, and the Coinbase Wallet, as unregistered securities. In a detailed blog post, the crypto exchange outlined its lengthy efforts to advocate for a regulatory framework with the SEC.
Last week, the US company took it a step further and went to court. Coinbase wants US judges to force the SEC to respond to the company's application for regulation submitted last year. The agency has refused to respond to any requests for over a year and is instead proceeding with questionable enforcement actions.
However, according to public statements from Chairman Gary Gensler, the existing rules are already clear. Cryptocurrency companies simply don't want to comply. This position is being questioned even within the agency itself. After all, the SEC head was unable to answer before Congress whether the second-largest cryptocurrency by market capitalization should be considered a security.
Gary Gensler, the chair of the SEC, was interviewed in Congress this week.
Here is a clip of him and Representative McHenry arguing on whether Ethereum, $ETH, is a commodity or a security, with Gary seemingly unable to answer the question. pic.twitter.com/4dMTOUnJzO
— unusual_whales (@unusual_whales) April 23, 2023
