WonderFi-owned Bitbuy acquires customers of fellow regulated Canadian crypto exchange Bitvo

Bitbuy, a subsidiary of Toronto cryptocurrency company WonderFi, has purchased all of the client accounts of Calgary-based Bitvo.

Bitvo and Bitbuy operate two of Canada’s registered crypto exchanges. As part of this deal, which was completed with an asset purchase agreement, Bitbuy has bought Bitvo’s customers and domain but has not assumed any of its operations or corporate liabilities. Bitbuy plans to migrate Bitvo’s clients to its platform, retaining select Bitvo employees to support this transition.

In total, Bitbuy has bought more than 17,000 registered client accounts from Bitvo. These accounts generated over $235 million CAD in trading volume and $1.5 million in net revenue during the past 12 months. Both companies declined to disclose the other financial terms of the deal, noting only that Bitbuy has made an upfront payment to Bitvo and will pay half of a net revenue share from the acquired client accounts subject to certain conditions and up to a specified cap.

“Given the growth we’ve seen in the institutional and OTC segment … [Bitvo] is a really complementary fit to that group.”
– Dean Skurka, WonderFi

In an exclusive interview with BetaKit, WonderFi president and CEO Dean Skurka argued that TSX-listed WonderFi has “demonstrated its position as a clear industry consolidator” in Canada’s crypto space.

“When the opportunity came up with Bitvo, their client base was very attractive to us given the profile of the clients, there was a longstanding relationship with Bitvo and [its president and CEO Pamela Draper], [so] we were happy to make this transaction work out.”

The Bitbuy-Bitvo deal, which closed on November 14, marks the latest in a slew of acquisitions that WonderFi has made over the past couple of years. With Bitvo, WonderFi has now either wholly acquired or purchased assets from nearly half of Canada’s regulated crypto trading platforms, including Coinsquare, CoinSmart, Bitbuy, and Coinberry.

WonderFi has since whittled this group down to two remaining platforms, Bitbuy and Coinsquare, shedding staff and implementing shared services as part of a push to reduce expenses and achieve economies of scale amid rising regulatory compliance and customer-acquisition costs.

Earlier this week, WonderFi released its third-quarter earnings report—the company’s first since merging with Coinsquare and CoinSmart—revealing that it reduced its overall headcount by more than a third from 148 to 93.

Adding those two companies helped WonderFi grow its revenue to nearly $10 million in Q3, a sharp increase compared to the $3.3 million it generated during the same period last year, and boost its cash and equivalents to around $25 million. While WonderFi’s net loss increased to more than $10 million, the company attributed roughly half of that figure to acquisition-related costs.

“We have a lot of respect for the business that the WonderFi group has built, and we’ve worked alongside them in the Canadian cryptocurrency landscape almost since inception,” Bitvo president and CEO Pamela Draper told BetaKit in an exclusive interview.

Draper, who is not joining WonderFi as part of the deal, will stay on in her current role as president of the payments business of Bitvo parent Digital Commerce Group (DCG) and focus her efforts there going forward. DCG has been in the crypto space since 2018 through Bitvo, and was one of the first Canadian crypto firms to become licensed with securities regulators.

“Bitvo was part of the greater [DCG] of companies,” said Draper. “The core business for [DCG] is banking and payments within the Canadian landscape. Bitvo had become somewhat of a non-core asset to the group and accordingly, we had made the decision, dating back to last year, to divest of that asset.”

The WonderFi acquisition follows the collapse of Bitvo’s previous arrangement with FTX. In June 2022, now-defunct crypto exchange FTX reached a deal to buy Bitvo to expand into Canada. That acquisition was expected to close during the third quarter of last year.

According to Draper, Bitvo was still awaiting approval from the Alberta Securities Commission for the acquisition when FTX collapsed. Bitvo then pulled out of that deal and began exploring other options.

Skurka said that WonderFi and Bitvo have been in “steady communication” since the FTX saga unfolded and upended FTX’s deal with Bitvo. The CEO added that once the company closed its three-way merger with Coinsquare and CoinSmart, WonderFi was able to focus on Bitvo and settle on a deal that works for both parties.

“We feel that this is a truly great home for our customers and the cryptocurrency aspect of [DCG’s] business,” said Draper.

While Bitvo has retail and institutional clients, Draper noted that its trading volumes are “heavily skewed” to institutional clients and its clients include representation from industries that will help diversify Bitbuy’s customer base.

“We have a lot of respect for the business that the WonderFi group has built.”
– Pamela Draper, Bitvo

“Given the growth we’ve seen in the institutional and OTC segment at Bitbuy and Coinsquare, this is a really complementary fit to that group,” said Skurka. “The client profiles here will represent meaningful diversification within the OTC segment, and we’re really excited about bringing those clients over.”

Speaking to WonderFi’s latest quarterly results, Skurka argued that the company is beginning to see the “clear benefit” of bringing WonderFi, Coinsquare, and CoinSmart together. Heading into Q4 2023, the company is now operating two crypto platforms instead of four.

Over the past 18 months, Skurka argued that the crypto industry “has gone through a meaningful maturation process” that has seen the market “flushed” of bad actors, such as Bitvo’s would-be acquirer FTX. Today, he believes that the sector sits in a better and “more sustainable” place because of it.

Skurka takes encouragement from the recent uptick in the price of Bitcoin and Ethereum and the rise in retail trading volumes amid excitement about crypto ETF filings from BlackRock and other players, and believes that WonderFi and the platforms it has consolidated are well-positioned to capitalize should this rebound continue.

Feature image courtesy Bitbuy.