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.