Chinese crypto operators are considering large-scale mergers and acquisitions to escape the ever-tightening grip of the Chinese authorities. As reported in the South China Morning Post, the fragmented digital asset sector in the country is being bought under scrutiny. As regulations tighten, the companies are looking for ways to consolidate their market hold.
The financial watchdogs of multiple Asian countries are ramping up efforts to scrutinize crypto industry players. Be it miners, crypto trading hubs, or exchanges; all are facing the heat. Mergers and acquisitions are being discussed across the spectrum, although in hush tones.
Chinese crypto operators view COVID-19 as an opportunity
Globally, mergers and acquisitions in the crypto sector have dropped around 40 percent. In the same period, Chinese crypto operators have reportedly increased M&A’s from earlier 14 percent to 22 percent. The increase in Asian collaborations, takeovers, and mergers can be attributed to the rising scrutiny by the authorities.
Changpeng Zhao of Binance mentions that the crypto exchange is interested in entering into collaborations with exchanges that have solid banking ties. This allows for local fiat currency trading and also represents better regulatory compliance. He adds that smaller exchanges may not survive the upcoming strict regulatory compliance, and consolidation will increase manifold.
March madness will further fuel mergers and acquisitions
The COVID-19 caused a crypto market meltdown that saw BTC prices fall $3,600 within a short span of 48 hours. The crazy market mania will cause further volatility and increase trading interest. Most smaller exchanges won’t be able to handle the spike in crypto trading.
Large exchanges would use this volatility to capitalize on their robust trading systems and acquire small exchanges. Not every market participant can handle the vicious swings in price. The well established Chinese crypto operators will undoubtedly use this opportunity to consolidate influence their respective sectors.
Investments in new businesses will also rise as cash-rich organizations will pick up value firms at throwaway prices. Zhao says that Binance spends a considerable amount every year to invest in new opportunities to grow their portfolio.