Mogo (MOGO.T) gets more of a foothold into Coinsquare in wake of Coinbase Global (COIN.Q) direct listing

coinsquare
04/16/2021

Mogo (MOGO.T) closed a 19.99% strategic investment in Canadian cryptocurrency exchange Coinsquare, paying out $27.4 million and 2.8 million shares today, according to a press release.

The investment gives Mogo the option to buy up to 43% at a fixed price using share purchases from present shareholders and exercising warrants under certain conditions. The investment builds on a longstanding relationship between the two companies. Coinsquare acts as Mogo’s official trading platform for MogoCrypto, which is a service that Mogo offers to its members to easily buy and sell Bitcoin.

“With the global crypto market cap now at over $2-trillion, doubling in just a few months, it’s clear that crypto is not only the fastest-growing asset class but an increasingly important one that investors want access to. Coinsquare has built a premier crypto platform and a leading market position in Canada. By deepening our relationship with Coinsquare and leveraging their crypto capabilities alongside Mogo’s broader digital wallet capabilities including our recently announced transaction with Moka, we believe Mogo is extremely well positioned to provide Canadians with a leading next-gen wealth offering,” said David Feller, chief executive officer of Mogo.

Coinsquare’s been around since 2014, and has since risen to become one of Canada’s most popular, if not its most popular, crypto-asset trading platform. The rise in interest in getting their claws deeper into their own platform isn’t that surprising when you consider Coinbase Global (COIN.Q) direct listing landed them with a valuation close to their anticipated $100 billion opening. While that number’s patently ridiculous, it does represent a widespread change of opinion regarding cryptocurrency and its auxiliary services.

Coinsquare themselves had an excellent Q1 2021. They’re up 700% year over year to over $630 million with attendant revenue increases of over 500%, from $3.15 million to an estimated $19 million in Q1, 2021.

“We believe the leading wealth platforms in Canada five to 10 years from now will be modern, digital-first platforms that offer a significantly enhanced value proposition, both in terms of product offering, but most importantly in terms of a modern user experience that helps consumers build wealth and achieve their financial goals more efficiently and effectively than ever. This strategic investment in Coinsquare is just one more step toward our goal of building Canada’s leading next-gen wealth offering,” said Feller.

He’s not wrong. The Coinbase direct listing is going to open the doors to any number of cryptocurrency exchanges looking to take advantage of the legitimacy conferred by being recognized by an exchange, and regulators. Increased competition will drive innovation, and there’s a strong probability that we’ll see cryptocurrency enjoy leaps and bounds as bigger names get involved.

Coinsquare is looking to get the attention of Canadian regulators, and specifically Investment Industry Regulatory Organization of Canada (IIROC) membership. The joint CSA/IIROC staff put together their Guidance for Crypto-Asset Trading Platforms: Compliance with Regulatory Requirements on March 29, 2021, which imagines crypto-asset platforms as fully regulated instruments. Coinsquare’s subsidiary, Coinsquare Capital Markets, has already filed an application to work as a marketplace and dealer as of November 2020.

—Joseph Morton

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