It’s only been a few months since Kraken, One Trading, and Backpack began offering crypto perpetual contracts known as Perps to European traders. The same Coinbase website is also live, but no official announcement regarding its launch has been made yet.
Other major companies planning to launch the same service include Bitstamp, Gemini, and Bybit.
Is Europe overreaching in its regulations?
However, a pan-European regulator may have scuppered the crypto exchange’s ambitious plans earlier this week.
The regulator has observed “an increase in the offering of derivatives, often sold as perpetual futures or perpetual contracts, that provide leveraged exposure to underlying value, including crypto assets such as Bitcoin and Ethereum,” which may fall under the classification of contracts for difference (CFD) products.
“This means that derivatives that meet the definition of a CFD are subject to measures such as leverage limits, mandatory risk warnings, margin settlement and negative balance protection, and prohibitions on financial and non-financial interests,” the European Securities and Markets Authority said in an official statement last Tuesday.
Verena Ross, ESMA Chair
This statement was issued several months before Verena Ross resigned as ESMA Chair. His second term ends at the end of October this year.
Perpetual contracts are derivatives written similarly to regular futures. The main difference between these contracts and regular futures contracts is that they have no expiration date. Settlement, pricing, and margin calculations occur continuously, often multiple times a day.
These criminals are used to offer volatile cryptocurrency derivatives, among other things.
BitMEX, which operates primarily from offshore locations, popularized cryptocrime during the 2017-2018 crypto boom, allowing traders to speculate on the price of Bitcoin against the US dollar with up to 100x leverage. The goal was to eliminate the roll positions and recurring fees of traditional Bitcoin futures contracts that complicate leveraged speculation.
The introduction of these 100x leveraged criminals was massive. BitMEX’s daily trading volume exceeded $1 billion in 2018. PERP’s monthly trading volume soared from $35 billion in January 2018 to $6.4 trillion in May 2025, according to data from CoinDesk.
According to Coinabse, decentralized exchanges (DEXs) will process more than $1.2 trillion in perpetual futures each month by the end of 2025, and HyperLiquid maintains a dominant presence among traders.
It was popularized by BitMEX, whose founder was convicted of a crime in the US and later pardoned by Donald Trump, but as demand soared, nearly every other crypto giant started offering criminal activity.
Criminals currently have the upper hand on all platforms when it comes to crypto derivatives trading.
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Cryptocurrency giants want to grab a slice of the European derivatives market
Cryptocriminals became popular and traded mainly on offshore platforms. The US and European markets remained largely off-limits to these offshore platforms.
Publicly traded Coinbase launched the first crypto criminal in the US on its CFTC-regulated derivatives platform last year.
At the same time, exchange giants have begun to focus on Europe, which requires Markets in Financial Instruments Directive II (MiFID II) licenses to offer derivatives products, including PERP. Coinbase, Kraken, and Backpack have chosen to acquire companies with existing MiFID II licenses. Coinbase and Kraken acquired two Cyprus-based CFD companies, while Backpack acquired the European division of now-bankrupt FTX.
Read more: Coinbase uses Cyprus license to offer cryptocurrency PERP and futures, closes BUX CFD account
Unlike their offshore counterparts, European PERP providers kept their ambitions in check and only offered up to 10x leverage. Coinbase in the US offers similar leverage limits.
Currently, derivatives providers can only offer up to 2x leverage on the cryptocurrency PERP if ESMA and other financial regulators in European countries known as National Competent Authorities (NCAs) classify PERP as a CFD.
ESMA noted that “although this official statement specifically refers to derivatives sold as perpetual futures or contracts, the assessment of whether national commodity intervention measures apply should be carried out for all derivatives offered, regardless of trade name.”
The regulator stressed that derivatives that are “not exclusively physically settled” are likely to fall within the scope of CFDs.
Europe’s promotion of CFD control
Regulators across Europe introduced strict product intervention rules for CFD providers in 2018. These rules limit the maximum leverage offered to 30x, which only applies to major forex pairs, while volatile cryptocurrency CFDs only allow 2x leverage, the lowest of all products.
European CFD brokers must display a clearly visible risk disclosure notice on their website, and the notice must include the percentage of traders who are losing money. None of the current Perp providers disclose this information.
Strict rules are in place, especially when it comes to CFDs, as these leveraged products are considered high risk and the majority of traders lose money. However, for criminals, the exact data on red-handed traders remains unclear.
ESMA suggests that BTC/ETH perpetual is likely to fall under European CFD regulations. That means 2:1 retail leverage and 50% margin settlement. Meanwhile, the CFTC has onshored PERPS-style products with up to 10x leverage through Coinbase/Cboe futures. Potential change in trading volume of more than $26 billion. #CryptoRegs pic.twitter.com/DQDiBnGUBY
— Vincent Bu Lu (@VincentBuLu1) February 25, 2026
Additionally, private transactions must include negative balance protection if classified as a CFD. This means that traders cannot lose more than they put in as margin.
Marketing limitations also arise. For example, Spain banned CFD advertising in 2023, which recently caused Plus500 to stop onboarding new customers in the country. France also bans the sale of CFDs, and Belgium is the only country where even the distribution of these high-risk products is completely prohibited.
Read more: Germany to require CFD-like risk warnings on turbo cars, ban bonuses
If Perps were to be treated as a CFD, all of these restrictions would apply, significantly limiting their market in Europe.
“The product name offered by a company (e.g. ‘perpetual futures’) is irrelevant for classification under MiFID II,” ESMA added. “Companies should conduct a careful legal analysis of these products and their features to determine whether they fall within the scope of product intervention measures.”
The CFD market is already feeling the impact of European regulations following the 2018 product intervention. Trading volumes on regulated platforms have fallen significantly, and many companies have set up bases on offshore islands.
We also believe that a significant portion of trading volume has moved from European exchanges to offshore markets that offer higher leverage. Offshore brokers are not allowed to market in Europe, but multiple regulators have caught and fined regulated brokers who opened accounts for European traders through their offshore divisions.
Now, the question remains: Will ESMA’s approach to criminals wipe out this segment before capturing the European market?
