Shares of cryptocurrency trading platform CoinSmart Financial Inc. jumped 24 per cent on their public debut on the NEO Exchange Tuesday, after the Toronto-based company became one of just a handful of cryptocurrency exchanges to obtain regulatory approval to trade publicly in Canada.
CoinSmart, which has a market value of approximately $75-million, went public on the NEO through a three-way merger with Mesa Exploration Corp. and Simply Digital Technologies Inc. The company’s stock, which rose as much as 60 per cent during the day, closed at $1.24, up 24 cents from its offering price of $1 a share.
CoinSmart chief executive officer Justin Hartzman said in an interview that the company had planned to go public in the spring of 2021, but had to delay the listing after Canadian securities regulators introduced new guidelines directed at crypto-trading platforms.
The explosive growth of the domestic crypto industry and the interest the sector generated amongst retail investors had prompted regulators to start establishing clear rules geared at investor protection earlier this year. In late March, the Canadian Securities Administrators, a group representing securities regulators in all provinces and territories, warned crypto-trading platforms that they would have to begin the process of getting regulated by early summer or risk being shut down.
“It also turned out that we had to obtain registered dealer status with the regulators in order to list on a public exchange,” Mr. Hartzman said. He added that that came as a “surprise” to the company because it was not explicitly outlined or stated in the CSA’s March bulletin.
In a statement to The Globe, the Ontario Securities Commission said that they ensured crypto-trading platforms who were working with them through the registration process were “aware of expectations and concerns.”
CoinSmart received regulatory approval by the Ontario Securities Commission to operate as a registered dealer just days ago, becoming the fourth cryptocurrency exchange – after Wealthsimple Inc., Coinberry Ltd. and Netcoins Inc. – to obtain the exemption.
The company has more than 120,000 users and generates revenue from fees obtained through crypto trades. It allows clients to buy and sell 11 different crypto tokens, including bitcoin, ether, litecoin and dogecoin. Company filings show that CoinSmart has generated revenue of $7.3-million to date in 2021, more than double its 2020 revenue of $3.6-million.
Mr. Hartzman, who owns roughly 15 per cent of CoinSmart, said part of the money raised from the company’s public offering will go toward expanding its product offering.
There are hundreds of global crypto exchanges accessible to Canadians, making the crypto-trading platform business a particularly competitive one. San Francisco-based Coinbase Global Inc., which has a market value of more than US$70-billion, is one of the largest and most popular crypto exchanges.
But Mr. Hartzman believes that part of the reason why Canadians use foreign crypto exchanges is because Canadian exchanges do not have sufficient product offerings. “Part of what we want to do is to work with regulators to bring more products here,” he said.
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Vanmala Subramaniam