Business 19 September 2018

Dan Taylor

Nasdaq makes $190M offer for Swedish crypto trading provider Cinnober

Nasdaq is set to acquire Sweden-based trading solutions provider Cinnober, in a deal that could see the stock exchange move into helping institutional investors gain access to new opportunities around cryptocurrency.

The move, announced last week, involves a $190 million all cash recommended public offer to Cinnober shareholders and warrant holders from Nasdaq. It plans to fund the acquisition with cash on hand or liquidity available under existing credit facilities.

It comes as the latest indication of Nasdaq’s growing interest in cryptocurrency trading and related services. Following the U.S. Securities and Exchange Commission’s (SEC) rejection of the latest Winklevoss crypto exchange traded fund (ETF) proposals, Nasdaq reportedly met with a panel of cryptocurrency experts to discuss ways of legitimising the sector, and of finding ways to placate the requirements of the SEC.

The acquisition will see Nasdaq take control of Cinnober, a firm with a reputation for bullishness around digital assets. Cinnober’s strategic partnership with cryptocurrency custodian BitGo also looks to be of interest to Nasdaq, for its appeal to institutional investors.

Custodianship has become an increasingly prominent issue amongst institutional investors, who are wary of deploying capital without solid security and custodial services in place.

With recent high profile hacks, including the Bancor exchange attack in June, some analysts have suggested these fears might be well placed. With its cryptocurrency custody service ready to go for institutional investors, the Cinnober acquisition therefore eliminates this barrier to market for Nasdaq in attracting institutional clients to invest in digital assets.

Nasdaq CEO and President Adena Friedman said the acquisition would allow the group to capitalise on new opportunities around cryptocurrencies and other digital assets.

“The combined intellectual capital, technology competence and capabilities of Cinnober and our Market Technology business will expand the breadth and depth of our fastest growing division at Nasdaq,” Friedman said in a statement. “This acquisition will enhance our ability to serve market infrastructure operators worldwide, and will accelerate our ability to expand into new growth segments.”

The acquisition comes at a time when large financial institutions are increasingly developing their custody services, with Bank of America and Citigroup announcing similar plans in recent months. Purchasing Cinnober will likely help position Nasdaq in this market, as well as marking their progress towards offering a more comprehensive lineup of crypto services.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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