Coinbase Explores Acquisition of FTX Europe: Report

<p>To
expand global crypto derivatives offerings, Coinbase considered the acquisition
of FTX's European entity following FTX's bankruptcy in November. The
discussions did not progress to an advanced stage. However, this move
highlights Coinbase's growing emphasis on derivatives.</p><p>Crypto
Futures Approval: Coinbase's Strategic Move</p><p>Derivatives
are complex financial instruments. These are based on the value of underlying
assets such as Bitcoin and Ether. They have gained substantial prominence
within the crypto industry. </p><p>Derivatives
trading has been more popular than spot trading. According to data from crypto
analytics firm Kaiko Research, in the second quarter of 2023, derivatives
trading volumes were six times larger than spot trading volumes.</p><p>Coinbase,
like other major U.S.-based firms such as Gemini, has ventured into offshore
exchanges to focus on Asian markets. The regulatory restrictions in the U.S.
have stalled the growth of derivatives trading. In August, Coinbase received
approval to offer crypto futures to its U.S. customers. It is planned for a
rollout shortly.</p><p>Europe
remains a region with uncertainties surrounding crypto derivatives because of
the introduction of new regulations. Until the collapse of FTX in November, FTX
Europe was the sole provider of a popular form of crypto derivatives known as
perpetual futures, or "perps," in the European market. </p><p>This
was made possible through a crucial regulatory license obtained in Cyprus. <a href="https://www.financemagnates.com/tag/ftx/" target="_blank" rel="follow">FTX</a>
initially acquired FTX Europe for $376 million in late 2021.</p><blockquote><p lang="en" dir="ltr">Coinbase in Talks to Buy FTX Europe (Source: Fortune) <a href="https://twitter.com/hashtag/crypto?src=hash&amp;ref_src=twsrc%5Etfw">#crypto</a> <a href="https://t.co/ROIUOAO2g1">pic.twitter.com/ROIUOAO2g1</a></p>— Altcoin Daily (@AltcoinDailyio) <a href="https://twitter.com/AltcoinDailyio/status/1705653528835113044?ref_src=twsrc%5Etfw">September 23, 2023</a></blockquote><p>Financial
documents of FTX Europe reveal that the platform continued to attract tens of
thousands of users until the bankruptcy of its parent company. The enduring
value of its license could only be transferred as part of an acquisition. This
drew interest from various potential buyers. Among them were Crypto.com and FTX
FDM.</p><p><a href="https://www.financemagnates.com/tag/coinbase/" target="_blank" rel="follow">Coinbase</a>
has also expressed interest in FTX Europe. An executive from Coinbase's
European operations inquired about the possibility of an acquisition. Both came
shortly after FTX's bankruptcy in November 2022 and September 2023. However, it has been reported
that Coinbase is no longer actively pursuing this potential deal.</p><p>Coinbase's
Ongoing Business Expansion Strategy</p><p>Coinbase
has previously made acquisitions in the <a href="https://www.financemagnates.com/tag/derivatives/" target="_blank" rel="follow">derivatives</a> space such as the futures
exchange FairX in January 2022. A Coinbase spokesperson stated, "We're
always evaluating opportunities to strategically expand our business and meet
with many teams around the world."</p><p>FTX
Europe has become a focal point in the <a href="https://www.financemagnates.com/tag/bankruptcy/" target="_blank" rel="follow">bankruptcy</a> proceedings of FTX. The
debtors' estate pursues legal action to recover hundreds of millions of dollars
from FTX Europe executives. Despite the interest shown by major crypto firms,
the estate had previously claimed that an acquisition was not feasible. </p><p>However,
the recent interest from Coinbase and Trek Labs have complicated the situation.
The deadline for a proposed sale has been extended to September 24. It
indicates that an acquisition remains a possibility. </p><p>A
spokesperson for the FTX debtors stated: "The FTX Debtors are committed to
maximizing the value of FTX's assets to drive customer recoveries. As such, the
FTX Debtors are continuing to evaluate whether there are viable options for the
sale of some or all of the assets of the FTX Europe business. This process
remains ongoing."</p><p>The
evolving dynamics in the crypto derivatives space, regulatory developments, and
the interest of major players like Coinbase highlight the cryptocurrency
industry's growth and evolution.</p><p>Regulation
and Lessons from the FTX Collapse: Insights from Dr. George Theocharides</p><p>In
a recent interview with <a href="https://www.financemagnates.com">Finance Magnates</a>, Dr. George Theocharides, the
Chairman of CySEC shed light on critical developments in the cryptocurrency
industry. He talked about <a href="https://www.financemagnates.com/forex/regulation/exclusive-cysecs-chair-regulators-should-be-careful-with-ai/">the collapse of FTX and the
SEC's actions against major players like Coinbase and Binance</a>. </p><p>Dr.
Theocharides emphasized the need for regulatory measures in the industry. He
opined it has operated without comprehensive oversight for several years.</p><p>He
highlighted the recent instances of crypto giants encountering difficulties.
FTX is a prime example. Troubled firms in the crypto space often received
bailouts. However, the collapse of FTX marked a significant departure from this
trend.</p><p>The
<a href="https://www.financemagnates.com/tag/us-sec/">U.S. Securities and Exchange
Commission (SEC)</a>
has taken a proactive approach to bring structure and regulation to the
cryptocurrency industry. Dr. Theocharides explained that the SEC's aggressive
stance towards major players in the United States is part of an effort to implant
regulatory oversight.</p><p>One
specific case illustrating the importance of regulation is FTX EU. FTX had
acquired a regulated entity in Cyprus. It secured a MiFID license in September
2022 for trading derivative products, although not for crypto trading. </p><p>FTX's
crisis broke out on November 9th, 2022, Dr. Theocharides' team took immediate
action. Given that FTX EU had properly segregated client funds and a strong
governance structure. They promptly requested that FTX in Cyprus suspend
operations, which was executed on the same day.</p><p>FTX
entered Chapter 11 bankruptcy proceedings, encompassing FTX EU. The primary
objective was to preserve the company's value while ensuring the safeguarding
and eventual return of client funds. Handling a crypto-related bankruptcy in
this manner is a complex process. It took time to establish a comprehensive
system from scratch for the secure return of client assets.</p><p>This
experience highlights two critical lessons. First, swift action is imperative
when a financial crisis unfolds. Second, appropriate regulation can help
mitigate risks associated with crypto assets. However, they may never be
entirely eliminated.</p><p>These
insights show us that the crypto world is going through a big change. There
will be more rules to make things clearer and to protect people who invest in
cryptocurrencies.</p><p>So,
the crypto world is on a path to becoming more open and safer for everyone
involved.</p>

This article was written by Tareq Sikder at www.financemagnates.com.