Dean Skurka, Bitbuy president, Kevin O'Leary and Ben Samaroo, WonderFi CEO.Handout
Vancouver-based WonderFi Technologies Inc. WNDR-NE is planning to acquire Toronto-based crypto exchange Coinberry Ltd. for $38.5-million in shares – a move that would put two out of six registered cryptocurrency trading platforms in Canada under the same roof.
The definitive agreement was announced on Monday, less than a month after WonderFi closed its deal to buy Toronto-based crypto exchange Bitbuy Technologies Inc. for $206-million in cash and shares. Experts say this latest acquisition is another step toward nationwide consolidation for the digital asset and blockchain sector.
Kevin O’Leary, a strategic investor in WonderFi and often the public face of the company, said in an interview that there are “several more and even bigger” acquisitions to come. If approved by regulators and shareholders, the Coinberry deal would give WonderFi a total of roughly 160 staff and 750,000 customers.
“We’re definitely setting ourselves up to go toe to toe on the global stage,” the Dragon’s Den and Shark Tank star said, adding that the acquisition will put the company in a better position to compete with large foreign exchanges such as Coinbase, Crypto.com, FTX and Binance. “But remember, we’re doing it on a regulated basis unlike those other players. We are 100 per cent operating under the order and we’re not taking any risks on that.”
The Canadian Securities Administrators, an umbrella group for provincial and territorial securities commissions, issued guidelines in early 2021 about how to regulate crypto exchanges. Since then, such regulation has remained a patchwork across Canada. Many international crypto firms have continued operating in this country despite being unregulated in some provincial and territorial markets.
Founded in 2017, Coinberry now has more than 220,000 users, who buy or sell bitcoin, ethereum and more than two dozen other cryptocurrencies. In 2021, it generated more than $13-million in revenue and gained approval from securities commissions across Canada to offer crypto products. “We have a shared belief with WonderFi that seamless integration and unified access to digital assets is the future and where we want to be positioned,” Andrei Poliakov, Coinberry’s founder and chief executive officer, said in a statement.
Bitbuy, which will be Coinberry’s sister company if the deal closes as expected, became the first regulated crypto marketplace in Canada when it received approval from the Ontario Securities Commission late last year.
In the short term, users of Coinberry and Bitbuy will see no changes, Mr. O’Leary said, but in the long term WonderFi will pick specific features from each platform and offer them to users of the other.
Apart from Bitbuy and Coinberry, only four other companies are registered to provide crypto trading services by all 13 of Canada’s provincial and territorial securities commissions: Wealthsimple, CoinSmart, Netcoins and Fidelity.
Erica Pimentel, a business professor at Queen’s University who studies blockchain technologies, said several Canadian companies that cannot afford the high cost of regulation and product innovation will be forced to enter mergers or acquisitions to compete in global markets.
“If I were a crypto company founder with a similar market valuation to Coinberry right now, I would be preparing myself for my next steps with an open mind. And I’d be surprised if Mr. O’Leary is the only investor eying these companies,” Prof. Pimentel said.
The Bitbuy acquisition faced many hurdles before it was finalized in late March. WonderFi’s chief executive officer, Ben Samaroo, said he hopes the regulatory process is smoother for the Coinberry deal, now that there is precedent for transactions like it.
“Crypto in Canada is so fragmented, where you’ve got all these different platforms, but when you look at that in comparison to some of the global players, they’re really irrelevant,” Mr. Samaroo said. “What we’re trying to do is build one singular Canadian player.”
Andreas Park, a finance professor who co-founded the University of Toronto’s blockchain research lab, said that although he agrees consolidation is coming, he is “not sure regulation or even consolidation is the answer to competition that Canadian crypto companies think it is.”
“At the end of the day, this is not a bordered market and you don’t need an exchange to get crypto. This is a Canadian utility that is just an access point to a global digital economy,” he said. “Making people play by new rules or coming up with one utility while we have massive other ones outside the country, which also operate here already, is not really going to change that.”
WonderFi shares closed at $1.19 on Thursday, down 1.65 per cent on the NEO stock exchange before it shut down for the Easter holidays.
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Temur Durrani