Crypto exchanges don’t exactly enjoy the highest reputation in the traditional financial sector. Especially not when they specialize in derivatives and their former CEO was involved in scandals. The situation is very different with traditional private banks from Germany, which have stood for stability and reliability for centuries. Representatives of both genres have now come together through a purchase contract. We are talking about the BitMEX crypto derivatives exchange and the Bankhaus von der Heydt (BvdH) – we have reported.
Coconuts and culture change
Crypto derivatives house BitMEX hasn’t always had the best reputation. After BitMEX was targeted by authorities in 2020, the company threatened to dismantle itself. One of the founders and then CEO, Arthur Heyes, even fled from the prosecuting authorities until he surrendered in Hawaii in April 2021.
The crypto derivatives exchange has been accused of not taking anti-money laundering rules all that seriously. In addition to poor compliance, the company, which was formerly registered in the Seychelles, was suspected of not providing adequate investor protection. Especially since no one made a secret of the fact that officials in the deregulated tax haven had been bribed. Heyes was completely unabashed in public joked that coconuts would suffice.
Voters apparently realized just in time that such management is unsustainable to lead one of the largest crypto derivatives exchanges in the world into the future. They immediately swung around and hired Alexander Höptner as the new CEO of BitMEX. Höptner was previously the CEO of Boerse Stuttgart and had a good reputation in both the traditional and crypto finance world. Exactly the right man to credibly carry out a cultural change and steer the company into regulated channels.
Compulsion to regulate and brutal upgrading
What has been in the offing for months will crystallize in the coming months. There will only be two worlds left in the crypto economy: the highly regulated world and the DeFi world. Any crypto companies that are in the gray area in between will not be able to survive in the face of tightening regulations and competition from highly regulated financial service providers.
For CeFi, i.e. centrally organized crypto companies, the Wild West of 2017 is definitely over. The constant certification of how important the regulation is, company headquarters in the European Economic Area (EEA) and reputable managing directors with a corresponding track record are not only good manners, but also represent BitMEX’s flight forward.
With the purchase of Bankhaus von der Heydt, BitMEX is now putting a decisive foot in the door of the traditional financial services company. In times when it is foreseeable that practically every bank will offer crypto services within the next three years, this timely positioning can be seen as wise. From Volksbanken and Sparkasse to N26 and Revolut, the first crypto plans have finally been published in recent weeks.
Banks: No future without change
The M&A deal is by no means to be judged as one-sided. Not only are crypto service providers under particular pressure to act, but also traditional banks, whose business model is increasingly being called into question by the crypto economy. In order for the financial institution, founded in 1754, to be able to successfully celebrate its 300th anniversary, it has to get involved in the token economy. After all, old areas of income in the traditional banking sector and its margins are dwindling more and more.
As one of the first banks in Germany, it therefore specialized in tokenization at an early stage. After all, the BvdH is not a universal bank, but a specialist institute with a focus on investment services, private equity and corporate finance. Establishing oneself here as a tokenization professional and offering custody and asset management for digital securities, for example, makes perfect sense.
Where do BitMEX and BvdH meet?
One might wonder where the potential synergies lie between the two financial institutions, which at first glance appear to be fishing in completely different waters. The first level is in the area of regulation. The BvdH has the relevant licenses for various financial services from BaFin. A provisional crypto custody license is already in place. On this basis, BitMEX could expand its product range by using the bank’s licensed services.
But Bankhaus von der Heydt can also offer professional and institutional customers a larger range of cryptocurrencies. For example, BvdH customers could access a wide range of cryptocurrencies. Crypto interest rate offers via lending or staking are also conceivable. It is, of course, pure speculation as to where concrete product cooperations will ultimately come about.
Signal effect and humility
The special thing about this M&A deal is the signal effect. Some bank executives may still see the crypto economy as a trend that does not affect their own business. The view that when in doubt you can simply buy in should also prevail on one or the other bank floor. Such deals, where it is the crypto companies that are the buy-side, should therefore instill some humility in the traditional finance world.
It’s no longer just about trading cryptocurrencies. Every area of a bank, from securities to lending, is now being targeted by crypto companies. The valuation of some crypto companies already exceeds that of some banks. The BitMEX-BvdH deal is just the beginning. More such M&A transactions between banks and crypto companies are likely to follow in the coming months.