Coinbase is hunting financial institutions with new products

At the beginning of May, it was announced that Coinbase was launching a new exchange from Bermuda. They did this to escape US regulators. According to US rules, crypto companies are not allowed to offer derivatives. Coinbase made on Thursday announced that this exchange will offer Bitcoin (BTC) and Ethereum (ETH) derivatives especially for institutional investors.

The importance of derivatives

Derivatives are products where traders can borrow assets to trade. For example, a derivative can be used to speculate without actually owning an asset. Examples of derivatives are leveraged products. In doing so, traders increase their potential profit or loss.

In addition to consumers, institutional investors are also interested in derivatives. The crypto exchange indicates that it makes this choice in connection with the growing institutional interest in these products. Whether the exchange will add options for other crypto derivatives in the future is currently unknown.

The derivatives market is a significant part of the crypto market. At the time of writing, the total trading volume of the last 24 hours is on the crypto derivatives market $148 billion. That of the spot trading volume, on the other hand, is ‘only’ 38 billion dollars. This is evident from data from Coingecko. So a big difference.

Unregulated Derivatives

This derivatives market within the crypto sector is largely unregulated. Few jurisdictions allow these products. Bermuda does. As a result, Coinbase can legally offer derivative products from this jurisdiction with their ‘derivatives exchange’.

You may have read on Thursday that a new crypto law came into effect in Hong Kong. From June 1, crypto companies can apply for an official license to offer crypto assets in Hong Kong. However, these companies have to comply with a lot of rules. For example, stablecoins and, yes, derivatives are prohibited for the time being.

However, legislators in Hong Kong do acknowledge the importance of derivatives discussed earlier. They say they will look into the matter and perhaps allow derivative products in the city-state in the future.

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