In a move touted as “gaining foothold” in the tightly regulated US derivatives market, Crypto.com has partnered with IG Group to buy two US assets.
The fast-expanding Singapore-based crypto exchange trading in Bitcoin and other digital currencies bought naming rights last month to rebrand Staples Center (LA’s main basketball arena) to Crypto.com Arena for approximately $700 million.
On Wednesday, the exchange bought IG Group’s stake in a US binary trading group (owned by FDSC 250 Company) and futures exchange for nearly $216 million.
The $216 million deal has given the cryptocurrency exchange room to offer futures and derivatives to US-based customers — an area too difficult for crypto exchanges to gain a foothold owing to strict regulations imposed around these risky investment products.
The acquisition to give customers access to new products
Kris Marszalek, Crypto.com’s chief executive, said acquiring IG’s stake will provide its customers “access to an entirely new set of financial tools to complement [the company’s] current offering”.
The deal includes acquiring a stake in Nadex (or North American Derivatives Exchange), which is a US-based binary trading group that offers traders binary bets such as the rise or fall of an index, commodity, or currency within a set timeframe. (Think five minutes).
The IG Group is also selling a 39% stake in Small Exchange — a futures exchange focused on retail traders. It was launched in 2020 with the help of leading Wall Street players including Jump and Interactive Brokers and Citadel securities.
The deal to “sharpen” Crypto.com’s focus on future business
According to IG Group, the deal is expected to close early next year (in the first quarter of 2022). But it will first undergo regulatory approvals before the deal closes.
Both companies — the futures exchange and binary trading group — were to be taken under the Crypto.com brand’s umbrella, with CEOs retaining their respective positions.
June Felix, IG Group’s CEO, said sales would allow Crypto.com to further “sharpen [its] focus” on expanding and integrating its options and future business — through the US brokerage (Tastytrade) acquired for about $1 billion early this year.
Derivatives are highly lucrative but they’ve also proved difficult over time, especially for some crypto group’s thanks for being so tightly regulated in many countries.
BitMex, a crypto operator, was penalized $100 million this year by a US federal court for trading in cryptocurrencies without proper authorization.
The US derivatives market is regulated by the Commodity Futures Trading Commission (CFTC). It’s this Commission that brought the suit against BiTMex last year for “illegally operating a cryptocurrency derivatives trading platform”.
