Coinbase, the prominent U.S. cryptocurrency giant, has officially abandoned its ambitious plans to acquire FTX Europe, according to a recent report by Fortune. Initially, Coinbase had set its sights on expanding into the European derivatives market through this acquisition, but the decision underwent a significant shift following a thorough evaluation of the ongoing regulatory complexities that currently overshadow the markets.
The appeal of FTX Europe primarily emanated from its “highly profitable” derivatives business, which had been operating under a regulatory license in Cyprus. Distinguished among European exchanges, FTX Europe held the unique distinction of being the sole firm authorized to offer perpetual futures—a derivative product that commands a substantial share of trading volumes. Notably, derivatives constitute nearly 75% of the global cryptocurrency trading volume, which surged to a staggering $2.13 trillion in June, marking a 13.7% increase from the prior month.
Coinbase was not the sole contender in this acquisition endeavor. Crypto.com and Trek Labs had also expressed keen interest in FTX Europe. The European arm of FTX had been operating profitably before its parent company faced bankruptcy in the preceding autumn, attracting the attention of several exchanges eager to bolster their derivatives offerings.
Coinbase’s most recent quarterly report unveiled a revenue of $707 million for Q2 2023. Of this total, $327 million originated from spot trading, reflecting a 13% decline from the preceding quarter. The potential acquisition of FTX Europe had been envisioned as a strategic move to counteract this declining revenue trend. In addition to this, Coinbase had secured regulatory approval in the United States last August to offer Bitcoin and Ether futures through its Commodity Futures Trading Commission-regulated exchange, FairX.
Coinbase’s withdrawal from the acquisition negotiations unfolds against the backdrop of mounting regulatory scrutiny directed at cryptocurrency exchanges. Regulatory challenges have remained a persistent concern for the company, especially as it seeks to expand its global presence.