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Kraken Exploring $100 Million Pre-IPO Funding as Robinhood Buys Bitstamp for $200 Million: US Crypto Exchanges Back in The Limelight?

Published June 7, 2024 1:42 PM
James Morales
Published June 7, 2024 1:42 PM

Key Takeaways

  • Robinhood has agreed a deal to acquire Bitstamp for $200 million.
  • Kraken is reportedly seeking to raise $100 million in a pre-IPO funding round.
  • The increase in dealmaking indicates renewed optimism surrounding the US crypto sector.

Between the Securities and Exchange Commission’s regulatory crackdown and growing competition from offshore rivals, American crypto exchanges have had a tough few years.

But recent news from Robinhood and Kraken demonstrate the continued strength of the US crypto sector, despite the challenges it faces. 

Robinhood Eyes International Expansion With Bitstamp Acquisition

With a sizable preexisting customer base, when it branched out into crypto in 2018, Robinhood quickly established itself as one of the leading exchanges in the US.

But on the international stage, it remains dwarfed by the likes of Binance, which frequently clocks tens of billions of dollars in daily trading volume. 

To bolster its international presence, on Thursday, June 6, Robinhood announced  its intention to buy Bitstamp for $200 million in an all-cash deal. 

“Acquiring a global exchange will significantly accelerate Robinhood Crypto’s expansion worldwide,” the firm said in a statement. “Bitstamp holds over 50 active licenses and registrations globally and will bring in customers across the EU, UK, US and Asia to Robinhood,” it added.

“Soon we’ll combine forces with Bitstamp’s global footprint, core spot exchange and industry-leading products like crypto-as-a-service, institutional lending, and staking, commented Robinhood CEO Vlad Tenev.

The agreement, which is still pending regulatory approval, represents one of the largest crypto mergers ever. But it isn’t the only deal making headlines this week. 

Kraken Seeking $100 Million Pre-IPO Round

On Friday, Bloomberg reported that Kraken is considering raising a final funding round ahead of a possible initial public offering (IPO).

The exchange is reportedly looking to raise $100 million in a pre-IPO round that would bring its total funding to over $220 million. 

The timing of the news suggests Kraken is looking to move while crypto markets remain buoyant. In the boom-and-bust cycle of cryptocurrency prices, raising capital has traditionally proven much harder during the periodic down cycles.

While market conditions provide a strong economic incentive for crypto deal-making, an improving regulatory outlook also provides a political one. 

Optimism Surrounding US Regulatory Outlook

Throughout 2023 and 2024, the SEC’s enforcement actions against US crypto exchanges (including Kraken and Robinhood) have cast a dark cloud over the sector. 

But after the House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT 21) last month, things are looking up for US crypto exchanges. 

If it passes the Senate, FIT 21 could thwart the SEC’s ongoing litigation against crypto firms by settling the question of when a crypto asset does and does not count as a security once and for all.

Under the proposed framework, cryptocurrencies would be considered commodities as long as the blockchain on which they are issued is sufficiently decentralized. It would therefore undermine the SEC’s previous classification of tokens like Cardano, Solana and ICP as securities.

Significantly, the bill was passed in the House with bipartisan support despite opposition from President Biden and SEC Chair Gary Gensler. This suggests growing dissatisfaction among Democrats with the administration’s hard line on crypto.

Exchanges like Kraken and Robinhood would be among the biggest beneficiaries of the proposed legislation, which would provide them with the legal certainty they have long called for and could cripple the SEC’s case against them.

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