Crypto.com has secured a Markets in Financial Instruments Directive (MiFID) license, enabling the platform to offer cryptocurrency financial derivatives within the European Economic Area (EEA). This development follows the company’s earlier in-principle approval to operate across the European Union under the Markets in Crypto-Assets (MiCA) license, marking a significant expansion of its services in the region.
According to Crypto.com’s CEO, Kris Marszalek, this license will allow them to offer customers across Europe more ways to engage with their platform. The company has been actively expanding its presence in Europe since receiving its MiCA license.
What are Crypto Derivatives?
Crypto derivatives are financial contracts whose value is derived from an underlying cryptocurrency. These instruments allow traders to speculate on the future price movements of cryptocurrencies without actually owning the digital assets. Common types of crypto derivatives include:
- Futures: Agreements to buy or sell a cryptocurrency at a predetermined price and date in the future.
- Options: Contracts that give the holder the right, but not the obligation, to buy or sell a cryptocurrency at a specific price before a certain date.
- Perpetual Swaps: Similar to futures contracts, but without an expiration date.
Why are Crypto Derivatives Important?
- Hedging: Derivatives can be used to hedge against price volatility in the cryptocurrency market.
- Speculation: Traders can use derivatives to profit from both rising and falling crypto prices.
- Leverage: Derivatives allow traders to control larger positions with less capital.
The Growing Trend of Crypto Firms Entering the Derivatives Market
Crypto.com is not alone in its pursuit of expanding into the crypto derivatives market. Several other major players in the industry have also made moves to offer these products to their customers:
- Kraken: Recently launched regulated derivatives trading on its platform under the European Union’s Markets in Financial Instruments Directive (MiFID II). This also involved leveraging a Cyprus-based entity, Payward Europe Digital Solutions.
- Coinbase: Agreed to acquire Deribit, a major crypto derivatives trading platform. Coinbase CEO Brian Armstrong has stated that his firm will continue to look for merger and acquisition opportunities, after acquiring crypto derivatives platform Deribit.
- Gemini: Received regulatory approval to expand crypto derivatives trading across Europe.
- Synthetix: Plans to re-acquire the crypto options platform Derive.
The Significance of MiFID and MiCA Licenses
These licenses are crucial for crypto companies looking to operate in Europe. MiFID (Markets in Financial Instruments Directive) is a European Union law that regulates firms providing services related to financial instruments, including derivatives. MiCA (Markets in Crypto-Assets) is a regulatory framework for crypto-assets that aims to provide legal certainty and consumer protection.
Crypto.com’s Acquisition History
Crypto.com has a history of strategic acquisitions to expand its services and reach. Some notable acquisitions include Fintek Securities, Charterprime, Orion Principals, and SEC-registered broker-dealer Watchdog Capital.
Conclusion
Crypto.com’s acquisition of a MiFID license represents a significant step in its European expansion and its commitment to offering a wider range of financial services to its users. The increasing interest in crypto derivatives among major exchanges highlights the growing sophistication and institutionalization of the cryptocurrency market. As regulatory frameworks like MiCA and MiFID become more established, the crypto industry is likely to see further innovation and adoption of derivative products.
