The parent company of Kraken, Payward, has entered into an agreement to purchase Bitnomial, a platform for digital asset derivatives, for up to $550 million. The deal, which includes both cash and stock, values the business at $20 billion, according to a news statement from Payward.
Bitnomial is the pioneer in the crypto-native platform space, having obtained all three licenses needed to run a full-stack derivatives firm in the United States. The platform was launched more than a decade ago. It is authorized to run a futures commission merchant, a derivatives clearing organization, and a designated contract market. Payward will be able to extend its reach in the United States more quickly thanks to this purchase, which will save years of regulatory buildout.
According to Arjun Sethi, co-CEO of Payward:
“The shape of a market is determined by its clearing infrastructure, not its front end.”
Addressing Strategic Holes Via Acquisitions
The cryptocurrency industry has been experiencing a protracted slump, but deal activity has just picked up again as companies seek to consolidate skills and strengthen infrastructure in the wake of years of market instability and regulatory scrutiny.
Instead of going for expansion at any cost, larger, better-capitalized firms are aiming to address strategic holes via acquisitions in areas like custody, derivatives, or compliance. Concurrently, smaller businesses with little capital are more amenable to acquisitions due to their reduced valuations, paving the way for a more practical phase of sector consolidation.
Kraken has been increasing its operations in preparation for its upcoming IPO. According to Payward, on November 19th of last year, it confidentially filed a draft S-1 with the United States Securities and Exchange Commission (SEC).
In order to diversify their business model beyond cryptocurrency trading and into the realm of multi-asset and derivatives infrastructure, Kraken has been actively pursuing a focused and more sophisticated M&A strategy over the last several years.