Coinbase Global is expanding overseas as its core U.S. business comes under heightened regulatory pressure. The stock may still be all about Bitcoin, though.
In a blog post on Wednesday, the company detailed plans to push into countries such as Brazil, Singapore, and Canada. The company also said it had received a license to operate in Bermuda and was "doubling down" in Europe.
The company has been saying for some time that it doesn't have the regulatory clarity it needs in the U.S., and could relocate overseas if it doesn't emerge in a number of years, CEO Brian Armstrong said this week.
Moving offshore wouldn't solve the company's U.S. legal problems, though. FTX made its home in the Bahamas before it collapsed, and other offshore exchanges have come under U.S. regulatory scrutiny.
Coinbase disclosed last month that the Securities and Exchange Commission had sent it a so-called Wells notice, a warning that the agency may sue the exchange. Coinbase said it was confident in the legality of its assets and services.
Breaking through in non-U. S. markets won't be easy. Legions of offshore exchanges already make markets in crypto and offer trading services, jostling for position amid rapidly-shifting market dynamics.
The world's largest crypto exchange, Binance, is an offshore entity with a behemoth futures business. Yet it has lost market share in the "spot" market in recent weeks after ditching its offer of fee-free trading. Others are picking up the pieces, with Deribit, which dominates as a venue for crypto options trading, revealing this week that it was launching fee-free trading for select tokens.
Coinbase may be entering the fray on two fronts: in the battle over global crypto traders and capitalizing on the higher-margin business of derivatives trading, which a report by Fortune indicates it may be about to launch.
Coinbase declined to comment.
Some analysts liked the idea of the company getting into derivatives.
"A derivatives platform would increase Coinbase's competitive positioning overseas, although competition is intense," Benjamin Budish, an analyst at Barclays, wrote in a Thursday note. "Given our expectation that a futures offering would be more lucrative on a per-trade basis vs. the spot market, we would assume that if Coinbase were to launch such an exchange, the revenue uplift could be quite meaningful."
Barclays rates Coinbase at Equal Weight/Positive with a $74 target.
None of this has moved the needle on Coinbase's stock. Shares fell 6.1% on Thursday to $60.50. The shares are up about 71% this year, though, getting a lift from the big rally in Bitcoin and other cryptos.
For now, the stock looks more like a derivative play on Bitcoin than a bet on profits from the derivatives themselves.