The rapidly-expanding cryptocurrency exchange Crypto.com, from Singapore, has reached a deal to acquire two trading platforms from IG Group. This would allow it to gain more authority on the highly regulated derivatives markets from the US.
The $216 million deal with IG Group
On Wednesday, December 1, 2021, Crypto.com agreed to a $216 million deal to acquire IG Group’s stakes in a US futures market and a binary trading platform owned by FTSE 250. Crypto.com bought both North American Derivatives Exchange (Nadex) and Small Exchange from London-based financial services firm IG Group in an attempt to expand its presence in the U.S.
This deal will allow Crypto.com to offer futures and derivatives to US customers.
This is an area that has been difficult for crypto exchanges due to strict regulations regarding the sale of these high-risk investment products to investors.
Chief executive of Crypto.com, Kris Marszalek, stated that the acquisition will give customers access to a new set of financial tools in addition to their existing offerings.
North American Derivatives Exchange, (Nadex) is included in the deal. This allows traders to place binary bets on what will happen within a given time frame, such as whether a currency, commodity, or index will rise or fall. This can take as little as five minutes. Options providers often allow customers to increase their chances of winning with borrowed money. This greatly increases the potential winnings and decreases the risk for consumers.
Customers are informed about their maximum gains and losses prior to the trade being executed by Nadex. IG Group will also be selling its 39% stake in Small Exchange. This futures exchange is geared towards retail traders and was launched last year by Wall Street giants such as Interactive Brokers Group, Phillip Capital, Jump Capital, Citadel and Peak6 Investments.
IG CEO June Felix said: “We’re really excited by this deal, as it delivers a significant return on the previous investments made in Nadex and Small Exchange and enables additional investment across all our businesses.”
Regulatory Issues
According to the groups, the deal is expected to close by the end of the first half of 2022, as it is subject to regulatory approval.
The exchange stated that both companies would be brought under Crypto.com, but their chief executives will remain. June Felix, chief executive at IG Group, stated that the sales would enable the company to “further hone our focus” on integrating, expanding its options, and future business via Tastytrade (the US brokerage it purchased for $1bn) in January.
Some crypto groups have found derivatives lucrative but difficult to use because the risky instruments are closely controlled by regulators in many other countries. BitMex, a crypto operator, was ordered by a US federal court to pay a $100m civil fine for providing leveraged crypto trading without authorisations.
In 2020, the Commodity Futures Trading Commission brought the case against BitMex alleging that BitMex was operating a cryptocurrency derivatives trading site illegally. BitMex stated at the time that they take their “responsibilities extremely seriously” and will continue to engage with regulators all over the globe.
Crypto.com is a privately owned company with 3,000 employees worldwide. It has seen a 20-fold increase in revenue over the past five years and has also gotten substantial cash. This was due to the boom in trading digital assets.
The crypto offerings are expanding
In terms of both asset prices and product offerings, the crypto market has seen a boom in the last year.
As rivals fight for market share, deals in crypto have increased. Coinbase Global Inc. announced a deal for Israeli cryptographic-security company Unbound Security and the team from crypto wallet firm BRD.
Gemini Trust Co. launched a fundraising campaign valued at $7.1 billion.
In October, Cboe Global Markets Inc. re-entered crypto by buying Eris Digital Holdings LLC.