M&A in the crypto sector – is the big takeover poker about to begin?

In addition to numerous cooperations that are concluded every week between blockchain start-ups, banks, corporations and IT service providers, the business with takeovers is also slowly picking up speed.

Is this a Bitcoin secret or a general trend affecting the cryptoscene?

The largest American crypto exchange, Coinbase, which recently acquired three financial service providers, has come into particular focus. The Bitcoin secret takes over Keystone Capital, Venovate Marketplace and Digital Wealth. With the takeover of the companies, Coinbase will also receive licenses as a broker, provider of alternative trading systems (over-the-counter trading) and investment advisor. In particular, Coinbase’s authorization to operate alternative Bitcoin secret trading systems facilitates the creation of a trading platform for security tokens. The situation is similar with the announcement that the Litecoin Foundation has acquired 9.9 percent of WEG Bank AG – the motives should be similar.

The question of why
The incentives for acquisitions and share purchases are therefore obvious. Crypto start-ups need licenses in order to get involved in the financial sector. It is precisely these licenses that regulated financial service providers can offer. Due to the increasing regulatory pressure, crypto start-ups are increasingly being urged to create the infrastructure and regulatory prerequisites to fully operate their business.

Anyone who has the necessary small change will try to take a shortcut, i.e. buy in licenses and infrastructures, instead of laboriously applying for and building them up. But one thing must also be clear: Just because a crypto start-up acquires a financial service provider equipped with licenses is not enough to make it a free ticket to subsequently conduct business at will. The authorities can still veto the decision even if they do not agree with the new business plans.

Vice Versa in the cryptosoft business?

But what about the opposite case – are there also established financial service providers that participate in crypto start-ups? In contrast to start-ups from the Bitcoin cryptosoft ecosystem, traditional financial service providers often lack innovative ideas: https://www.forexaktuell.com/en/cryptosoft-scam/ It is precisely here that strategic acquisitions of crypto start-ups could secure the survival of financial service providers. Those who do not develop further will sooner or later be forced out of the market. This knowledge is also gaining ground in the otherwise rather conservative financial sector.

So it is not surprising that Goldman Sachs, for example, is involved in Circle. It can be assumed that established financial service providers will also secure shares in promising crypto companies in the future. Instead of acquiring licenses, financial service providers are thus acquiring innovations that they would otherwise have to develop or build themselves very laboriously.

Is the poker game already in full swing?
As meaningful as the M&A business may be from a strategic point of view in both directions, we are still at the beginning of development. The crypto economy is still in its infancy and is often far from being commercially successful or offering practicable solutions. It can therefore be assumed that not only the usability of the crypto products must be further optimized, but also the interfaces to other IT infrastructures. In addition, the continuing lack of clarity in regulation is preventing many financial service providers from investing more in the industry.

The more the start-ups in the blockchain and crypto area develop, the more the M&A business will pick up speed. After all, financial service providers want to buy functioning use cases and not unprofitable idea workshops that might eventually be successful.

On the other hand, for crypto start-ups it often only makes sense to buy in financial service providers when they have the necessary small change and their products or services have sufficient market maturity to be commercially successful.

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Blockchain.com announces support for Airdrops

The world’s largest wallet provider Blockchain.com is planning the launch of an Airdrop extension. In the future, token developers will be able to reach the nearly 30 million wallets for Airdrops. The company announced this in a recently published white paper.

Airdrops are a proven means of distributing new tokens. Without users having to buy the new coins, mine them or make any other efforts, they are provided with free tokens by the publisher. What at first sounds like a rather airy number has good reasons: Token-based networks build on a certain network size. This means that a network can only be used with a sufficient number of users. Airdrops are therefore a convenient way of achieving the necessary distribution of tokens at a stroke. The white paper states:

“Airdrops are good for those who want their token-based networks to flourish. Airdrops can quickly and effectively decentralize these networks and increase their usability through network effects.

Active monitoring by Bitcoin revolution scam

So can wallet owners look forward to a real rain of money? Rather like this: Is Bitcoin Revolution a Scam? Read This Review Before You Sign Up!. The company strives for an active monitoring of the Airdrops and advertises with high quality demands on the implementation. Only those projects that are designed as follows can qualify for the Bitcoin revolution scam programme:

The Airdrop should be addressed directly to the Bitcoin loophole scam

It should be aimed at a broad user base and onlinebetrug says it is scam. The distribution should be free and fair. The focus should be on the purpose of the token and not on the price increase. Airdrops do not imply use. Since there is no need to invest in advance, Airdrops does not initially entail any financial risks for users. However, it is uncertain whether the Bitcoin loophole scam projects will ever result in concrete benefits.

“Free money” actually doesn’t sound bad. But Airdrops are above all one thing: a clever PR gag. Because the underlying calculation is, besides the decentralization of the network, simply to generate attention.

Whether or not the wallet users of Blockchain.com will be exposed to a flood of useless tokens in the future depends primarily on the company’s moderation.

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No concern about monetary policy

Because the value of all crypto tokens is low compared to the global money supply, monetary policy does not need to worry about their effectiveness at the moment. The President of the Bundesbank was sceptical about the issue of digital central bank money. Interest rates on digital money or the possibility of negative interest rates would expand the scope of monetary policy if private individuals were unable to switch to cash. But there is a “serious catch”: Digital central bank money could enter into direct competition with bank deposits. However, if commercial banks had to offer interest premiums to prevent bank deposits from being converted into digital central bank money, their margins in the deposit lending business would continue to fall, which could be problematic for financial stability.

Warning of digital banking storm

Weidmann sees an even greater risk in digital bank runs. If savings can be transferred to one’s own account at the central bank at the click of a mouse in order to flee the private financial system, the threshold for an onslaught on the banks would presumably be much lower than in the analogue world. Weidmann also cited an example of this: if not only Northern Rock’s customers but also those of other British banks had brought their flocks to the central bank in the UK in the crisis year 2007, they would have completely destabilized the entire banking system.

The President of the Bundesbank also referred to critics who have identified the possibility of money creation by commercial banks as a weak point of the current monetary system, because these are a major cause of harmful credit cycles. Historical experiences with a single-stage banking system and with central lending by the central bank were “sobering”, central administrative economies had shown that the state or the central bank were not the better bankers.

No competition for cash

Weidmann was convinced that the need for crypto tokens and digital central bank money would not arise if central banks were to keep payment transactions up to date with the latest technology. He was keen on the Eurosystem’s efforts to enable banks to make central bank money payments in real time by the end of the year. This would enable transfers between private individuals in a matter of seconds around the clock, every day of the year, regardless of which bank they have their account with.

Referring to Agustín Carstens, managing director of the Bank for International Settlements, who had described Bitcoin as a mixture of financial bubble, snowball system and environmental disaster, Weidmann said he did not think crypto currencies were at least a convincing alternative to state money:

“For a stable monetary and financial system we do not need crypto tokens, but central banks committed to price stability and effective bank regulation.

Gregor HallmannGregor Hallmann has been a business journalist for 20 years. As editor of a news agency, the studied political scientist closely followed the Internet boom and the subsequent bursting of the dotcom bubble around the turn of the millennium. Since then, as a freelance journalist, he has been writing critically about economics, finance and investment – and also has crypto currencies and block chains in mind.

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