Coinbase receives regulatory approval in Bermuda to list perpetual futures to users outside United States

Coinbase, the leading cryptocurrency exchange in the US, has obtained a license from the Bermuda Monetary Authority to offer perpetual futures contracts to its international customers. Perpetual futures are a type of derivative contract that allows traders to speculate on the price of an underlying asset without an expiry date.

Unlike traditional futures contracts, which have a fixed settlement date and price, perpetual futures are designed to mimic the spot market and track the price of the asset closely. Perpetual futures are traded on crypto exchanges, such as Binance, BitMEX, and FTX, and offer high leverage and liquidity.

In a blog post, Coinbase explained that Bermuda is a well-regulated jurisdiction that supports innovation and growth in the crypto industry. The company also praised the island’s progressive approach to crypto regulation, which includes a comprehensive framework for digital asset businesses and a sandbox program for emerging technologies. Coinbase said that it will comply with all the relevant rules and standards set by the Bermuda authorities, and that it will work closely with them to ensure a safe and transparent trading environment for its customers.

One of the main features of perpetual futures is the funding rate, which is a mechanism to ensure that the price of the contract stays close to the spot price. The funding rate is a periodic payment that is exchanged between long and short positions, depending on the market conditions. If the funding rate is positive, long positions pay short positions, and vice versa. The funding rate is determined by the difference between the contract price and the spot price, as well as the interest rate of the underlying asset.

Perpetual futures offer several advantages for crypto traders, such as:

• Exposure to price movements without holding the actual asset.
• Ability to profit from both rising and falling markets.
• Access to high leverage and margin trading.
• Lower fees and transaction costs than spot trading.
• No risk of expiry or rollover.
• However, perpetual futures also entail some risks and challenges, such as:
• High volatility and liquidation risk.
• Funding rate fluctuations and unpredictability.
• Counterparty and exchange risk.
• Regulatory uncertainty and legal issues.

Therefore, traders who want to use perpetual futures should have a clear understanding of how they work, how to manage their risk, and how to choose a reliable and secure exchange. Perpetual futures are a powerful tool for crypto trading, but they require careful planning and execution.

Coinbase’s CEO, Brian Armstrong, has expressed his frustration with the SEC’s lack of clarity and guidance on crypto regulation, but he has also reiterated his commitment to working with the regulator and following the rules. He said that Coinbase is “happy to play by the rules” and that it wants to be “a good actor in this space”. He also said that Coinbase is “not looking to do anything controversial” and that it is “trying to be in the SEC’s good book”.

Coinbase’s efforts to comply with the SEC may be seen as a strategic move to gain a competitive edge over other crypto platforms that are less regulated or operate outside the US. By aligning itself with the SEC, Coinbase may be able to attract more institutional investors and customers who value security and legitimacy. Coinbase may also be able to avoid legal troubles and fines that could damage its reputation and profitability.

However, some crypto enthusiasts and advocates may view Coinbase’s compliance as a betrayal of the original vision and ethos of cryptocurrency, which is based on decentralization, privacy, and freedom from government interference. They may argue that Coinbase is compromising its principles and values for the sake of profit and appeasement. They may also question whether Coinbase is truly serving the interests of its users and the crypto community, or whether it is becoming a tool of the establishment.

Ultimately, Coinbase’s decision to cooperate with the SEC may have both benefits and drawbacks for its business and the crypto industry as a whole. It may help Coinbase gain more trust and legitimacy in the eyes of regulators, investors, and customers, but it may also alienate some of its core supporters and users who value innovation and autonomy. It remains to be seen how Coinbase will balance these trade-offs and navigate the complex and evolving regulatory landscape of crypto.

Coinbase added that it plans to launch more products and services in Bermuda in the future, such as staking, lending, and decentralized finance (DeFi) solutions. The company also said that it will continue to explore other markets and jurisdictions where it can offer its crypto platform and services. Coinbase stated that its mission is to create an open financial system for the world, and that it is committed to building trust and accessibility for everyone who wants to participate in the crypto economy.