The crypto exchange to set up outside of the U.S: Gemini announced

The crypto exchange Gemini has announced setting up a derivatives platform outside of the U.S. The announcement for launching the derivative Gemini Foundation platform was made on the 21st of April.

KEY TAKEAWAYS

• The Gemini crypto exchange has decided to open up a derivatives platform outside of the U.S
• The Exchange is looking to work on its growth and expansion in the international markets.

Derivatives are basically financial contract that derives their value from cryptocurrencies. These contracts are used to hedge against fluctuating price movements. The decision of the exchange to launch a derivatives platform out of the U.S. was to tap into the growing demand for cryptocurrency. Also, it indicates the challenges faced by the crypto firms under the extreme regulatory environment of the country. As the US regulators have ramped up their scrutiny of cryptocurrency exchanges and other firms in the industry,

The Gemini Foundation will offer its services in several countries including; Singapore. India Bahamas, The British Birgin Island, Brazil, The Cayman Islands, Chile, El Salvador, Israel, Panama, New Zealand, Philippines, Peru, Switzerland, Uruguay, Thailand, Turkey, Vietnam, and more. As for the U.S., the foundation will not be providing its services there.

Derivatives First Contract

The first contract of Gemini will be a Bitcoin perpetual contract which was denominated in Gemini dollar (GUSD). A contract without any expiration dates is known to be a perpetual contract. Also, unlike futures contracts the perpetual contract does not even have any settlement date.

Ethereum ETH//GUSD perpetual contract will be the next up after Bitcoin. Both spot and derivatives products will be up for trading specifically by eligible customers. The customers will also get to convert the US Dollar and USD into the GUSD on a 1:1 basis. Even the fees, profits, and even losses will be processed in GUSD.

Gemini Foundation’s default leverage is 20x for its derivative products. This means that the traders can open positions that are 20 times larger than their initial investments. However, the maximum possible leverage is 100x.

The perpetual futures trading of the platform may not be regulated by the Commodity Futures Trading Commission (CFTC). This regulatory body is responsible for regulations of futures and options trading in the US. The Futures contract offering exchanges are not available in the US like BitMex, as they don’t comply with CFTC regulatory measures. By offering perpetual contracts the platform will not be subjected to the same regulatory requirements as traditional futures contracts This will allow it to operate in a more flexible environment.

What Lead To This Decision?

The reason behind this is probably the investigation that is being carried on the Gemini platform by the New York State Department of Financial Services (NYDFS). The investigation was carried due to the claims that users believed their assets in their Earn accounts were protected by the FDIC Federal Deposit Insurance Corporation.

The earn program of the Gemini offered users the ability to earn interest on their crypto holdings. The withdrawals were halted in November 2020 due to ‘unprecedented market turmoil’. Later in January 2021 the Genesis firm which operates the program filed for Chapter 11 bankruptcy.

Moreover, The US Security and Exchange Commission SEC charges Gemini with offering unregistered securities in their Earn program. Thus to continue its growth and expansion Gemini had to turn to the international markets, The founders of the exchange Tyler and Cameron Winklevoss recently announced their plans to establish a new engineering hub in India. they also highlighted their big plans for international growth this year in APAC. They even applied a pre-registration with the Ontario Securities Commission to operate in Canada as well.