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Crypto Bear Market Triggers Rise in M&A Activity

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In 2018 there was a rapid decline in initial coin offerings, a slowdown in blockchain business launches, and a bearish crypto market. During this period, companies with good liquidity have been scaling up and strengthening by acquiring startups. 

Also Read: Global Cryptocurrency M&As Rise

 M&A Deal Frenzy in 2018

In 2017 the number of cryptocurrency and blockchain companies that launched more than doubled compared to the year prior. The current bear market that has since come to characterize 2018 has proven the ideal time for institutional investors and venture capitalists to make a land grab and acquire innovative startups.  Crypto Bear Market Triggers Rise in M&A Activity

There’s been something of a deal frenzy involving cryptocurrency and blockchain-related companies seeing mergers and acquisitions (M&A), which have increased by 200 percent in 2018. M&A is the lifeblood of Wall Street and this activity is expected to continue to accelerate within the cryptosphere as we head into 2019. 

In an interview with news.Bitcoin.com, Danish Saxo Bank founder Lars Seier Christensen revealed that he is actively searching to acquire crypto businesses, saying: “I am also looking at a couple of serious fund vehicles that do extensive research across the space. Because of course there will be some gold nuggets that have been dragged down unfairly in this bear market as happens in all bear markets.” 

Crypto Bear Market Triggers Rise in M&A Activity
Lars Seier Christensen

According to JMP Securities’ head of blockchain and digital assets investment banking, Satya Bajpai, the industry is witnessing a “land grab” for innovative technology, access to new markets, intellectual property, and talented employees through M&A, reports CNBC

The most recent data from JMP Securities and data from Pitchbook shows 115 deals have already been announced globally this year, with roughly 30 more expected by the end of this year. This compares with just 47 mergers and acquisitions that were completed in all of 2017. 

Crypto Bear Market Triggers Rise in M&A Activity
Source: JMP Securities

Rundown of Key M&A Deals From 2018

There have been a number of key crypto and blockchain acquisitions this year, with one of the most active companies being Coinbase. The California-based exchange has not allowed diminished trade volumes to keep it from actively acquiring startups. Earlier this year, there were also rumors about a potential acquisition of Coinbase by Facebook, though this appears to have been little more than speculation. 

Crypto Bear Market Triggers Rise in M&A Activity

Coinbase acquired decentralized ERC20 trading platform Paradex. The company also acquired Earn.com for an estimated $100 million, a platform that lets users receive cryptocurrency for answering emails and completing tasks

Another notable acquisition involved Goldman Sachs startup Circle which acquired cryptocurrency exchange Poloniex.

Coinsource, a Texas-based cryptocurrency ATM operator, became the first digital asset ATM provider to be granted a Bitlicense in the state of New York.

Japanese insurance group Sompo Holdings acquired a 10 percent stake in Bitpesa, a Kenyan digital currency exchange and payments company.

Trade.io acquired British brokerage firm Primus Capital Markets for an undisclosed amount to offer BTC-backed Forex trading.

Consensys, the software company established by Ethereum co-founder Joseph Lubin, acquired struggling space startup Planetary Resources.

Japanese mega ecommerce and internet company Rakuten Inc. entered the crypto space by acquiring an existing crypto exchange to fast-track its wat into the Japanese cryptocurrency market.

Shapeshift completed the acquisition of Bitfract, a software firm which operates a service that allows users to swap from one cryptocurrency to many in an instant.

Ernst & Young, one of the major global accounting firms, acquired technology assets and related patents from Elevated Consciousness.

Blockchain research and development firm Nchain announced the acquisition of a majority stake in the Bitcoin Cash-centric startup Handcash.

Chinese bitcoin company BTCC was acquired by a Hong Kong-based investment fund.

It seems the market downturn that has pervaded through 2018 has been the ideal time for large corporations to snag a good deal and secure a stake in the future of the rapidly developing crypto space.

Will M&A activity continue to accelerate as we head into 2019? Let us know in the comments section below.


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Bermuda Issues Draft Crypto Custodial Services Regulation

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The Bermuda Monetary Authority (BMA), the island’s foremost financial services regulator, has published a draft regulation for cryptocurrency custodial services. The regulation – Code of Practice for Digital Asset Custody – outlines prescriptions to ensure the secure handling of customers’ crypto assets.

Also read: Brazilian Supermarket Chain Now Accepts Payment in Bitcoin

‘Safe Space for Investment’

Bermuda Issues Draft Crypto Custodial Services Regulation

The authority, which is also tasked with prevention of financial crime, drafted the code to expand a safe space for investment that will not only protect local investors but also attract foreign businesses, it said in a statement on Dec. 18.

Security concerns with respect to hot and cold storage of assets, key generation, transaction handling and incident reporting are covered by the prescriptions, both technology and business wise. The regulatory clarity provided by the code is expected to ensure that business is done in a prudent manner.

Moad Fahmi, senior advisor on financial technology with the BMA, commended the draft regulation as progressive. “The code complements the extensive body of rules for Digital Asset Businesses. We view custody as an important part of a healthy digital asset ecosystem – one that will encourage quality players to contribute positively to our financial system,” Fahmi said.

Bermuda Issues Draft Crypto Custodial Services Regulation

He stated that the framework was built “with the aim of making sure that the core objectives of financial regulation are respected.” These include “protecting consumers, ensuring stability of our institutions and maintaining integrity and confidence in financial markets – with a focus on maintaining the highest standards of AML/ATF,” Fahmi detailed.

Craig Swan, the managing director of insurance at the authority said the code will expand BMA’s cybersecurity capacity as it moves into the regulation of digital assets, in keeping with its mandate to be forward-looking and comprehensive.

Some of the regulations are targeted at forestalling security breaches in the crypto world such as those that affected Mt. Gox, where one of the points of opacity is whether the former CEO embezzled clients’ money or used the company’s revenue procedurally. According to the BMA regulation, clients’ assets must be kept apart from the company’s assets for security reasons.

Bermuda Looks to Become Crypto Hub

The authority, which recently undertook consultations about the future of cryptocurrencies in Bermuda’s financial sector, is bent to weed out illegal activities such as money laundering. The code allows indemnity insurance for cryptocurrency exchanges. It also permits the roping in of qualified custodians and contingency measures to safeguard clients’ money.

Bermuda Issues Draft Crypto Custodial Services Regulation

Bermuda has been positioning itself as a choice destination for cryptocurrency businesses, with notable competition from Malta, Gibraltar and Liechtenstein, by providing regulatory clarity and maintaining a progressive attitude towards the industry. Earlier this year, Bermuda’s legislature passed a law allowing startups that do initial coin offerings to apply to the finance minister for speedy approval.

“We want to position Bermuda as the incubator for this industry,” E. David Bart, Prime Minister of Bermuda, said in an interview during a cryptocurrency conference in May. The latest regulation is a logical step towards bolstering investor confidence in the small but economically advanced country.

What do you think about Bermuda’s draft regulation on custodial services? Let us know in the comments section below.


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