Cryptocurrency exchange Coinbase has twice explored the possibility of acquiring FTX Europe in a bid to expand its overseas derivatives business. These attempts were made in November 2022, following FTX's parent company's bankruptcy, and again in September 2023. However, Coinbase has decided not to proceed with the acquisition. Other interested parties reportedly include Crypto.com and Trek Labs. The sale's closing date has been extended to September 24, and FTX is set to spend around $400 million to acquire its European subsidiary.
FTX Europe conducts its derivatives business under a regulatory license in Cyprus and was the sole provider of certain popular derivatives products, like perpetual futures, before its parent company's collapse. Derivatives are financial instruments whose value is based on an underlying asset, such as Bitcoin. They serve various purposes, including hedging, leverage, and market speculation.
Acquiring FTX Europe could significantly boost Coinbase's fee revenue, as cryptocurrency derivatives trading continues to grow despite market downturns. Coinbase reported $707 million in revenue for Q2 2023, with $327 million from spot trading, a 13% decrease from the previous quarter. Meanwhile, global Derivatives trading volume on centralized exchanges increased by 13.7% in June, reaching $2.13 trillion, with Binance leading the way.
Coinbase is also expanding its presence in the US derivatives market. It received regulatory approval in August to offer cryptocurrency futures investments to eligible US customers through FairX, a derivatives exchange regulated by the Commodity Futures Trading Commission. This move aims to tap into the substantial global cryptocurrency derivatives market, which accounts for nearly 75% of the total cryptocurrency trading volume worldwide.
