Coinbase has announced plans to launch an offshore derivatives exchange, according to a blog post on Wednesday. This is after receiving a Wells Notice from the U.S. Securities and Exchange Commission (SEC) last month.
The company revealed that it has obtained a license from the Bermuda Monetary Authority, signaling its commitment to expanding its international business amidst an increasingly hostile regulatory environment in the U.S.
The offshore derivatives exchange, set to launch in Bermuda as early as next week, will allow Coinbase to offer products like perpetual swaps, which are currently unavailable in the U.S. due to regulatory constraints. By launching this new venture, Coinbase aims to better compete with global crypto trading leader Binance, who was also sued by US regulators, and diversify its revenue base.
The announcement follows recent warnings from Coinbase CEO Brian Armstrong that, without a clear regulatory framework in the U.S., crypto firms may consider relocating offshore. While Coinbase is not expected to immediately leave the U.S., its decision to expand operations in Bermuda and Abu Dhabi highlights the growing importance of locations like Hong Kong, Dubai, and Singapore as primary business hubs for the crypto industry.
This shift can be attributed to the lack of regulatory clarity and recent actions taken by U.S. regulators, such as the SEC and CFTC, against crypto companies and developers. These actions have raised concerns about market manipulation and the future of the industry in the U.S., prompting companies like Coinbase to explore alternative locations for their operations.
A Wells Notice is an official notification from the U.S. Securities and Exchange Commission (SEC) indicating that the agency is considering bringing an enforcement action against a company or individual for potential violations of securities laws. The notice provides the recipient with an opportunity to respond and present their case before any formal action is taken. Although a Wells Notice does not guarantee that a lawsuit will be filed, it is widely considered an ominous sign for the recipient, as most companies or individuals that receive such a notice ultimately face legal action from the SEC. The mere issuance of a Wells Notice can significantly impact a company’s reputation and market standing, making it a critical event in the regulatory landscape.