Coinbase, the largest cryptocurrency exchange in the US, was reportedly interested in acquiring FTX Europe, the European subsidiary of FTX, one of its main competitors. According to sources familiar with the matter, Coinbase approached FTX Europe after the latter filed for bankruptcy protection in August 2023, following a series of regulatory setbacks and legal disputes.
FTX Europe, which was launched in 2020 as a licensed entity in Malta, had been struggling to maintain its operations in the region amid increasing scrutiny from regulators and lawmakers. The company faced several lawsuits from disgruntled customers and former employees, who accused it of fraud, market manipulation, and breach of contract.
FTX Europe also faced fines and sanctions from various authorities, including the UK’s Financial Conduct Authority (FCA), Germany’s Federal Financial Supervisory Authority (BaFin), and France’s Autorité des Marchés Financiers (AMF).
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In a bid to save its business, FTX Europe filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code, which allows a company to reorganize its debts and assets while continuing to operate. The company hoped to find a buyer or a partner that could help it resume its activities and regain its market share.
Coinbase has been looking to expand its derivatives offerings globally, especially since its spot trading volumes have dipped in the bear market. Spot trading refers to buying and selling cryptocurrencies at their current market prices. According to data from Kaiko Research, in Q2 2023, the trading volume for crypto derivatives was six times the volume of spot trades.
Coinbase, which had been expanding its presence in Europe and diversifying its product offerings, saw an opportunity to acquire FTX Europe and strengthen its position in the continent. Coinbase had been competing with FTX for market share and liquidity in the global crypto space, especially after FTX acquired Blockfolio, a popular portfolio tracker app, for $150 million in 2020.
Coinbase reportedly offered to buy FTX Europe for a fraction of its original valuation, which was estimated at $1 billion before the bankruptcy filing. However, the deal did not materialize, as FTX Europe’s creditors and shareholders rejected Coinbase’s proposal. They argued that Coinbase’s offer was too low and that FTX Europe still had potential to recover from its troubles.
FTX Europe’s bankruptcy case is still ongoing, and the company is still looking for a viable solution to exit from its predicament. Meanwhile, Coinbase continues to pursue its growth strategy in Europe and beyond, as it faces increasing competition from other players in the crypto industry.
For the crypto industry, it means that there is still a lot of uncertainty and complexity in the regulatory landscape, especially for derivatives products. It also means that there is still a lot of demand and innovation in this sector, as more players enter the market and offer new solutions.
Coinbase’s attempt to acquire FTX Europe was an ambitious move that could have given it a significant edge in the European derivatives market. However, due to various factors, such as competition, valuation, integration, and regulation, Coinbase decided to drop its plans and look for other opportunities. This shows that the crypto industry is still evolving rapidly and facing many challenges and opportunities along the way.