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The collapse of FTX in November might have played a major role in the decision of Gemini to foray into derivatives trading.
A new report from The Information suggests that Gemini will soon launch an international cryptocurrency derivatives exchange. According to the report, Gemini has been silently working behind the scenes in the past few months to bring the plan to fruition. As part of its efforts, the exchange has reportedly reached out to several firms that can provide it with enough liquidity as it begins to work on the creation of a new exchange.
Gemini, Others Look to Fill a Huge Gap Left by FTX
It is worth mentioning that the collapse of FTX in November might have played a major role in the decision of Gemini to foray into derivatives trading. Before its collapse, FTX held a significant share of the derivatives trading market. However, its downfall has created space for Gemini and other potential competitors, including Binance and Coinbase.
At the moment, American crypto exchange Coinbase is also working on its overseas business. Like Gemini, Coinbase seeks to launch an overseas platform where it can offer perpetual futures as well.
Why Are Regulators Kicking?
By all intentions, Gemini is hoping to use its new overseas platform to specifically offer perpetual futures. And the move is understandable for reasons that that type of derivative is prohibited in the US.
US regulators have consistently considered perpetual futures to be too risky for retail traders. On several occasions, they have hammered on the fact that these derivatives do not have an expiration date and can be traded with sizable leverage. So, it might be in the best interest of firms to offer them outside the jurisdiction of the United States.
Despite this knowledge, however, some crypto exchanges still find themselves in the crosshairs of regulators. For example, the news of a Commodity Futures Trading Commission (CFTC) lawsuit against Binance has been making the rounds all week long. Binance reportedly broke US derivatives trading laws by teaching US-based clients how to bypass restrictions and use its overseas platform. This was even though it wasn’t cleared to operate in the US.
Binance’s actions have now placed a new spotlight on crypto operations that claim to operate overseas.
While Binance battles it out with the CFTC, Coinbase is also bracing up for imminent enforcement action. The US Securities and Exchange Commission (SEC) also recently served the American exchange a Wells Notice.