Cryptocurrency firms sneak into mainstream through ‘back door’ listings

Several cryptocurrency exchanges have moved closer to mainstream markets by buying listed companies, looking to raise funds and present themselves as embedded in the traditional financial services world they once spurned.

In the most recent deal, US crypto broker-dealer Voyager Digital on February 11 achieved a “back door” listing on Toronto’s Venture Exchange after it bought control of mineral exploration firm UC Resources.

Such purchases, also known as reverse mergers, allow companies to offer shares to the public without the rigours and regulatory scrutiny of a full initial public offering (IPO).

“Many [cryptocurrency] exchanges have put a lot of strategic effort into trying to legitimise their operations and their reputations, and for some there’s an assumption that having some exposure to the traditional public market will help,” said Fei Ding’an, managing partner at Ledger Capital, a digital asset investment firm.

Japan’s Financial Services Agency (FSA) is the only major national regulator so far to have drawn up a definitive framework to govern digital assets and the platforms where they are traded.

In January, OKC Holdings, a company controlled by Star Xu, the founder of crypto-exchange OK Coin, bought 60.5 per cent of LEAP Holdings, a Hong Kong-listed construction firm, for HK$484 million (US$61.69 million).