Cryptocurrency exchange Coinbase had pursued the acquisition of FTX’s European entity as it looked to increase its foothold in the worldwide derivatives business.
Coinbase’s interest in acquiring FTX Europe highlights the exchange’s plan to push into the derivatives markets and expand its derivatives business globally.
Coinbase’s Interest In FTX Europe
While the talks never materialized, Coinbase’s interest in FTX’s European arm is significant. This is because it signals Coinbase’s push into the derivatives market as it looks to further its global ambitions. Derivatives are complex financial instruments that derive their value from an underlying asset such as Bitcoin (BTC) or Ether (ETH). Derivatives have also become considerably popular compared to spot trading. In fact, the second quarter of 2023 saw that the derivatives volume was six times larger than the spot volume, according to data from Kaiko Research.
Until the collapse of FTX, FTX Europe was the only entity offering a form of crypto derivatives called perpetual futures. According to the financials of FTX Europe, the company continued to add thousands of users until its parent entity went bankrupt. The company’s license, which was highly valued, could only be transferred through an acquisition. This attracted the attention of multiple buyers.
Coinbase issued an interest in acquiring FTX Europe as recently as September 2023 when an official from the exchange enquired about the feasibility of such an acquisition. However, the exchange has since abandoned its pursuit to acquire FTX Europe, confirmed a source familiar with the developments.
Coinbase’s Previous Acquisitions In The Derivatives Space
Significant regulatory limitations in the United States have cast a long shadow on the crypto derivatives trading markets. Due to the prevailing circumstances, Coinbase has been working to launch an offshore derivatives exchange that focuses on the Asian markets. The exchange is also advocating a campaign to bring greater clarity to the US crypto market.
Coinbase has previously made other acquisitions in the derivatives space, such as the acquisition of the futures exchange FairX. A spokesperson for Coinbase stated when speaking about the acquisition,
“We’re always evaluating opportunities to strategically expand our business and meet with many teams around the world.”
There are other parties interested in acquiring FTX Europe as well. These include Crypto.com, a Philippines-based cryptocurrency exchange run by a former Binance executive, and FTX FDM, the Bahamian entity of FTX. FTX FDM is currently under the control of liquidators appointed by the country’s Supreme Court.
FTX Europe A Flashpoint In Bankruptcy Proceedings
FTX Europe has become something of a flashpoint in FTX’s bankruptcy proceedings. The firm was originally founded as Digital Assets DA AG and was acquired by FTX in 2020 as it looked to expand its derivatives offerings across Europe. The acquisition was also made to prevent rivals such as Kraken and Binance from using DAAG’s tokenized stock service.
While FTX Europe recorded healthy profits, it became a target of the bankruptcy estate as FTX’s bankruptcy proceedings moved forward. FTX debtors, led by John Ray III filed a lawsuit that sought to claw back hundreds of millions of dollars from FTX Europe and its executives. According to the estate, the company’s acquisition was a disastrous business decision, which saw FTX pay $376 million for a $2 million operating license.
An Acquisition Not Feasible
While FTX Europe has been attracting considerable interest from crypto firms, debtors have argued that an acquisition isn’t feasible. According to a spokesperson, professional advisors to the fTX debtors have ruled that there is no realistic possibility of a sale.
“The FTX debtors’ professional advisors have concluded that there is no realistic possibility of a sale.”
The interest from Coinbase and other entities in FTX Europe also complicates the bankruptcy estate’s stance as it continues to entertain offers for the entity. The deadline for any potential sale has been extended from the 17th of September to the 24th of September. This means an acquisition still remains a possibility.
“The FTX Debtors are committed to maximizing the value of FTX’s assets to drive customer recoveries. As such, the FTX Debtors are continuing to evaluate whether there are viable options for the sale of some or all of the assets of the FTX Europe business. This process remains ongoing.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
