Coinbase is set to enhance its derivatives offerings in the European Union by acquiring a Cyprus-based entity licensed under the Markets in Financial Instruments Directive (MiFID II), which governs financial instruments in the EU.

MiFID II, updated in 2017, addresses previous criticisms of focusing too heavily on stocks, and now covers a broader range of asset classes, including derivatives, fixed income, and currencies. The acquisition will allow Coinbase to offer regulated derivatives, such as futures and options, in the EU. Currently, the exchange offers spot trading in cryptocurrencies like Bitcoin.

In a blog post, Coinbase highlighted that this acquisition would ensure the company complies with its “Five-point Global Compliance Standard.” This includes measures for Anti-Money Laundering (AML), Know Your Customer (KYC), global sanctions enforcement, governance best practices, and continuous monitoring and reporting.

Derivatives are a significant focus for Coinbase, accounting for 75% of the platform’s total trading volume. However, the exchange faces tough competition in the European derivatives market from larger players such as Binance, Bybit, OKX, and Deribit. Derivatives are financial instruments whose value depends on the performance of an underlying asset, index, or rate.

Coinbase’s push for global expansion comes as it faces regulatory challenges in the United States, where it is currently embroiled in a lawsuit with the U.S. Securities and Exchange Commission (SEC) over alleged securities law violations.

In a strategic move, Coinbase chose Ireland as its central regulatory hub in the EU in October 2023, in anticipation of the upcoming Markets in Crypto-Assets (MiCA) regulations. The exchange has also applied for a single MiCA license, aiming to secure it by December 2024 when the new regulations are fully implemented.

In addition, Coinbase obtained a virtual asset service provider license in France in December 2023, enabling it to offer crypto custody and trading services in the country.