3 - 5 minute read
Gemini, a United States-based cryptocurrency exchange, recently announced the launch of a new offshore division called Gemini Foundation. The platform will offer derivatives trading services to users in 31 countries, including Singapore, Hong Kong, India, and South Korea, among others. It will not offer services to customers in the United States due to the tightening and uncertain regulatory environment for crypto firms in the country.
The Gemini Foundation will offer both spot and derivatives products, with the platform’s first derivatives contract being a Bitcoin perpetual contract denominated in Gemini dollars (GUSD). Eligible customers will be able to trade both spot and derivatives products, as well as convert USD and USD Coin (USDC) into GUSD on a 1:1 basis. Fees, profits, and losses will also be processed in GUSD. The default leverage is set to 20x, with the maximum possible leverage at 100x.
Perpetual contracts are different from traditional futures contracts as they never expire. Perpetual futures trading is not regulated by the Commodity Futures Trading Commission (CFTC). Exchanges offering crypto futures contracts, such as BitMEX, are not available for U.S. customers.
Gemini’s move comes amid regulatory scrutiny by U.S. authorities. The New York State Department of Financial Services is reportedly investigating the exchange over claims that many users believed assets in their Earn accounts had been protected by the Federal Deposit Insurance Corporation. Gemini’s Earn program halted withdrawals in November, after its operating partner, Genesis, cited “unprecedented market turmoil.” In January, the firm filed for Chapter 11 bankruptcy, and reports suggested that up to $900 million in Earn user funds could have been locked. The U.S. Securities and Exchange Commission also charged the exchange with offering unregistered securities through Earn in January.
Gemini’s founders, Tyler and Cameron Winklevoss, recently announced “big plans for international growth this year in APAC.” Earlier this month, the exchange filed a pre-registration with the Ontario Securities Commission to become a restricted dealer in Canada.
Gemini’s move to launch an offshore division could be seen as a response to the regulatory uncertainty in the United States. The exchange’s decision to offer derivatives trading services to users in 31 countries could provide an opportunity for traders to access new markets and take advantage of potential price differences.
1/ Introducing Gemini Foundation – a non-US crypto derivatives platform.
— Gemini (@Gemini) April 21, 2023
Coming soon…https://t.co/HtFHHfAP8d
However, traders should be aware of the risks involved in trading derivatives, especially with leverage. The default leverage of 20x and the maximum leverage of 100x could lead to significant losses if the market moves against traders. Traders should also be aware that perpetual futures trading is not regulated by the CFTC, which means that there is no guarantee of protection for traders in case of fraud or market manipulation.
The Bottom Line
Gemini’s launch of the new offshore division, Gemini Foundation, could provide an opportunity for traders to access new markets and take advantage of potential price differences. However, traders should be aware of the risks involved in trading derivatives, especially with leverage. The move could also be seen as a response to the regulatory uncertainty in the United States.
