The three-way business combination, initially announced in April, creates what the trio claims will be “Canada’s largest regulated crypto asset trading platform.” The deal brings over $600 million CAD in assets under custody and more than 1.65 million users under the same roof.
Amid rising regulatory compliance and customer-acquisition costs, some crypto firms have opted to join forces.
The merger comes during a challenging time for the crypto industry. After digital asset prices plummeted last year and numerous high-profile, unregulated exchanges collapsed, many retail investors were left holding the bag. In response, securities regulators in Canada and around the world have ramped up efforts to crack down on conflicts of interest and risky behaviour by crypto firms to protect consumers.
Amid this environment, with rising regulatory compliance and customer-acquisition costs, some crypto companies have opted to join forces.
A WonderFi spokesperson claimed to BetaKit that the three-way merger required approval from Canada’s Competition Bureau.
However, in a statement to BetaKit following the original publication of this story, a Competition Bureau spokesperson said it was not the case that the merger required review and was approved by the agency. At the same time, the spokesperson noted that the Competition Bureau is obligated by law to conduct its work confidentially, and therefore cannot confirm whether it investigated this specific matter.
WonderFi, the new controlling firm of Coinsquare and CoinSmart, has led a great deal of consolidation in Canada’s crypto sector. With its latest deal, WonderFi has now absorbed one-third of registered Canadian crypto exchanges, a group that also includes Bitbuy and Coinberry.
In April, WonderFi interim CEO Dean Skurka told BetaKit that through the three-way merger, WonderFi has now “reached the scale that we needed” in terms of consolidation.
Skurka told The Globe and Mail that over the coming months, the firm intends to wind down the CoinSmart platform and “cherry pick” which parts of the combined business it will keep and discard.
The deal marks an end to a saga that began earlier this year when Coinsquare backed out of its agreement to acquire CoinSmart amid reported talks about a merger with WonderFi. CoinSmart first rejected and then later accepted Coinsquare’s move, but announced its intention to seek monetary damages in court. In April, the three firms inked a deal to combine.
As part of the merger agreement, TSX-listed WonderFi has issued about 270 million common shares to Coinsquare investors, and approximately 119 million common shares to CoinSmart’s shareholders. Coinsquare shareholders are expected to own 43 percent of the combined firm, WonderFi shareholders 38 percent, and CoinSmart shareholders 19 percent. Common shares of the combined firm will trade on the TSX under the symbol ‘WNDR.’
According to Skurka, the firm’s path to profitability will involve more than just crypto and shared services. Now, WonderFi is focusing on diversification as it looks to expand beyond just digital asset trading and into equities trading, sports betting, and casino operations.
UPDATE (07/13/23): This story has been updated to note comments from a Competition Bureau spokesperson.
Feature image courtesy WonderFi.