We'll have one platform with 1.6 million retail clients: Crypto exchange CEOs weigh in on merger
Three Canadian crypto companies are combining to create the country’s largest regulated crypto asset trading platform, and executives said the merger will give them a new edge for business success in an industry that’s been roiled by regulatory concerns.
Monday’s announcement from WonderFi, Coinsquare and CoinSmart confirmed BNN Bloomberg reporting from earlier this year about the merger talks.
The news comes after the crypto world was rocked by the collapse of Bahamas-based FTX Trading Ltd. last fall and financial crimes charges against its founder in the U.S. The saga sparked heightened public discussion about regulation of the relatively new industry.
Dean Skurka, president and interim CEO of WonderFi, told BNN Bloomberg on Monday that the merger offers a “path to profitability” amid a heightened regulatory environment.
“As regulatory costs increase I think it naturally leads to consolidation and acquisition opportunities like we've seen today,” Skurka said in a television interview.
“Certainly, with a combined company now we believe the scale will address a lot of those concerns, and there will be a clear path to profitability.”
A news release from WonderFi said the three companies have more than 1.65 million registered Canadian users and over $600 million in combined assets under custody.
WonderFi will issue about 269,727,080 common shares to Coinsquare’s shareholders and 119,181,733 common shares to CoinSmart’s shareholders as part of the transaction.
Of the combined company, WonderFi shareholders will own 38 per cent, Coinsquare shareholders will own 43 per cent and CoinSmart shareholders will own 19 per cent on a partially diluted basis.
Last October, Coinsquare became the first Canadian platform to be registered with the Investment Industry Regulatory Organization (IIROC). The companies said Monday that the regulated trading business would be “consolidated under Coinsquare’s investment dealer registrant” and new SRO member, Coinsquare Capital Markets Ltd.
Coinsquare CEO Martin Piszel said he sees the company’s head start on the regulation process as a competitive asset.
“Regulation is now coming first and it’s a competitive advantage,” Piszel told BNN Bloomberg on Monday.
Justin Hartzman, co-founder and CEO of CoinSmart, said keeping up with changing regulation can be costly and time-consuming, and merging the companies gives customers a “regulated, safe environment” for their money, and ideally an attractive platform that meets their financial needs.
He said he’s also watching long-term to see how the crypto sector benefits from customers who may be more nervous about holding their money at traditional banks, after failures at select mid-sized U.S. banks last month. Hartzman said the regulation-first approach to the trading platform should give customers reassurance.
Piszel estimated that it will take four to six months for the companies to receive the necessary regulatory approvals for the merger.
Shark Tank star Kevin O’Leary, a strategic investor in WonderFi, also spoke with BNN Bloomberg on Monday about his views on the crypto consolidation.
O’Leary, who was a spokesman for FTX before the company’s meltdown, said the Canadian crypto merger has set a model for the world in terms of crypto regulation in a new era for the industry.
“If you can't play ball with the regulator, you will not exist,” he said.
“Canada will be the shining example of how it's going to go in every single geography.”