In a significant development for Europe’s crypto landscape, Backpack Exchange, a trading firm founded by former employees of Sam Bankman-Fried’s Alameda Research and FTX, has acquired the bankrupt European arm of FTX for $32.7 million. The deal, which includes the transfer of FTX EU’s coveted MiFID II license under the Cyprus Securities and Exchange Commission (CySEC), positions Backpack to become the only regulated perpetual futures provider across the European Union.
Backpack’s Bold Derivatives Ambitions
Armed with the MiFID license, which enables firms to offer crypto-asset services under Europe’s new Markets in Crypto Assets (MiCA) regime once a notification is submitted, Backpack Exchange CEO Armani Ferrante has laid out an ambitious roadmap for the company’s European operations. According to Ferrante, Backpack’s new EU arm will roll out a comprehensive suite of regulated crypto derivatives, starting with being first-to-market in the perpetual futures space.
“Once we return FTX EU customers’ funds, we’re excited to begin serving a regulated perpetual futures product as a priority.”
– Armani Ferrante, CEO of Backpack Exchange
While competitors like Bitstamp, Coinbase, and Netherlands-based D2X have secured MiFID II licenses and plan to launch USD-denominated futures and options, Backpack appears poised to beat them to the punch in the lucrative perpetuals market. This could give the upstart exchange a significant first-mover advantage as it seeks to challenge derivatives giants like Deribit.
From Solana to CySEC: Backpack’s Rapid Rise
Backpack Exchange’s founders have deep roots in the crypto industry, having previously contributed to the Solana ecosystem and built successful wallet and NFT businesses. The company raised $17 million in funding last year, demonstrating strong investor confidence in its vision and capabilities.
The acquisition of FTX EU and its MiFID license marks a major milestone in Backpack’s journey, catapulting it into the top tier of regulated European crypto exchanges virtually overnight. With its notification submitted under the MiCA framework, Backpack expects to launch its perpetual futures product in Q1 2025.
Reviving FTX’s European Legacy
For FTX EU customers, the Backpack acquisition offers a glimmer of hope after months of uncertainty in the wake of FTX’s spectacular implosion. Ferrante has pledged to return customer funds before launching any new products, signaling a commitment to rectifying the sins of Backpack’s predecessor.
The deal also breathes new life into FTX’s European infrastructure, which had been left in limbo following the exchange’s bankruptcy. By absorbing FTX EU’s licenses and presumably some of its talent, Backpack aims to succeed where FTX failed – in building a compliant, trustworthy crypto derivatives platform that can stand the test of time.
Regulatory Tailwinds Fuel Derivatives Boom
Backpack’s entry into the European derivatives space comes at an opportune moment, as regulators across the continent are finally providing clarity around crypto-asset licensing and oversight. The MiCA regulation, set to take effect in 2024, establishes a harmonized framework for crypto businesses operating within the EU.
This regulatory certainty is expected to unleash pent-up demand for regulated crypto investment products, particularly among institutional investors who have been waiting on the sidelines. With its MiFID license and first-mover status in perpetuals, Backpack is well-positioned to capture a significant share of this growing market.
Challenges and Opportunities Ahead
Of course, Backpack’s path to dominance in European crypto derivatives is far from assured. The company will face stiff competition from established players like Deribit and Binance, as well as from traditional finance giants like CME Group and Eurex, which are increasingly eyeing the crypto space.
Backpack will also need to navigate the complex patchwork of national regulations that exist alongside MiCA, ensuring that it remains compliant across all the jurisdictions in which it operates. Building trust with customers and regulators will be paramount, given the reputational baggage that comes with FTX’s tainted legacy.
Nevertheless, Backpack’s founders appear undaunted by the challenges ahead. With their deep industry experience, regulatory know-how, and first-mover advantage in perpetuals, they are betting big on Europe’s crypto derivatives market – and they just might have the winning hand.
As Backpack prepares to launch its eagerly-anticipated perpetual futures product in the coming months, all eyes will be on this ambitious upstart to see if it can deliver on its lofty promises. If successful, Backpack could not only reshape Europe’s crypto trading landscape but also set a new standard for regulatory compliance and customer protection in an industry still reeling from FTX’s fall.
