Staying true to their creative nature, several cryptocurrency businesses, especially the exchange platforms are following the “reverse merger” approach to move close to mainstream markets, reports South China Morning Post, February 22, 2019.
Taking the Back-Door Entry
Leave it to the brains in the crypto industry to circumvent any obstacle thrown their way.
An increasing number of cryptocurrency exchanges are inching closer to mainstream financial markets by purchasing listed companies and then aiming to raise firms by camouflaging as a veteran of the traditional financial services industry they once despised.
The latest example of the aforementioned approach is February 11, 2019, deal which saw the US-based crypto broker-dealer Voyager Digital sneak its way into the Toronto Venture Exchange after it acquired a controlling stake in a mineral exploration company called UC Resources.
A major upside to this “back door” approach is that it doesn’t require the companies to go through the excruciating and tiring process of a full initial public offer (IPO).
Fei Ding’an, managing partner at Ledger Capital, a digital asset investment firm said:
“Many [cryptocurrency] exchanges have put a lot of strategic effort into trying to legitimize their operations and their reputations, and for some there’s an assumption that having some exposure to the traditional public market will help.”
In fact, Voyager Digital isn’t the first firm to follow the relatively less straining route to mainstream markets.
In January 2019, Star Xu led OKC Holdings acquired 60.5 percent stake in a Hong Kong-listed construction firm named LEAP Holdings for $61.69 million.
Regaining the Lost Confidence
Exposure to mainstream markets could help re-establish the confidence lost in cryptocurrency businesses in recent times.
The industry, especially the cryptocurrency exchanges, have had their goodwill tarnished continually due to unfortunate events like hack attacks, money laundering, and security mechanism failures.
BTCManager reported on September 19, 2018, how the New York Attorney General Barbara Underwood’s office slammed cryptocurrency exchanges like Binance, Gate.io, and Kraken for running their operations without obtaining the mandatory licenses and breaking the city’s digital currency regulations.
On a more recent note, the dramatic story surrounding Canada’s Quadriga CX has again highlighted the need for a robust and secure exchange platform that puts customer’s safety at the top of their priority list.