Blockchain.com Looking to Expand in Emerging Markets Through M&A

Chief Business Officer says company is focused on building footprint within regions where users “need” crypto

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Source: lanekasselman.medium.com

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key takeaways

  • Blockchain.com wants to be one of the biggest financial institutions in Latin America, Chief Business Officer Lane Kasselman said
  • A large traditional bank buying Blockchain.com or other large crypto firms is unlikely in the current regulatory environment, the executive argued

Blockchain.com made several notable acquisitions last year and is looking at more such opportunities to expand across several emerging markets. 

The London-based crypto firm, which offers users the ability to buy, sell and trade crypto, has 80 million wallets across 200 countries. Its $300 million investment round in March gave the company a $5.2 billion valuation.

Blockchain.com is focused on building its footprint across regions such as Latin America, Africa and Eastern Europe, Blockchain.com Chief Business Officer Lane Kasselman told Blockworks in an interview.  

“We are looking at markets where the customers need crypto, because they’re much more sticky, they don’t react the same way to market volatility and they’re much more interested in a wide variety of products and services,” he explained.

Blockchain.com announced in November its acquisition of SeSocio, an Argentina-based crypto company that also has a presence in Brazil, Chile, Colombia, and Mexico. The addition of SeSocio’s 100 employees brought Blockchain.com’s global headcount to roughly 400. 

While the acquisition made Blockchain.com the largest crypto company in the region, Kasselman said, it is now looking to become one of the biggest financial institutions in Latin America.

“Companies that try to parachute in and build their business in countries where they don’t have a significant staff presence often times stumble,” the chief business officer noted.

“The real strategy is acquiring somebody who’s already one of the market leaders and working through them to really grow your business.”

Kasselman noted that there are more than 200 million unbanked individuals in Latin America, which he said is often due to unsafe or inaccessible banking systems. Crypto has helped solve that issue and has opened them up to a digital ecosystem.  

“Maybe they’re looking for a safe store of value,” Kasselman said. “But they’re also looking for access to Netflix and Spotify, and so their crypto wallet or blockchain wallet becomes an onramp.”

The executive said that Blockchain.com is not currently focused on building its presence in India due to an uncertain regulatory environment in the country.   

Product outlook for Blockchain.com

Kasselman noted that the first financial services accounts for some younger investors, such as recent college graduates, is a crypto wallet. He added that the demand for such customers, and others, is often around crypto offerings that mirror more traditional financial services.

The company launched margin trading on its exchange in October to allow users to access margin with up to five times leverage in the bitcoin-to-US dollar and ether-to-USD trading pairs in more than 150 countries. It has also set up a waiting list for debit cards, Kasselman said. 

Different markets have different needs, he added, noting that users in Latin America and Africa are more interested in seamless remittances to move value across borders, as well as less volatile tokens that may provide a safer store of value.

“Blockchain.com is less in the business of predicting what customers want and more in delivering to them exactly what they are asking for,” Kasselman explained.

Crypto M&A more broadly

In addition to its purchase of SeSocio last year, Blockchain.com acquired artificial intelligence startup AiX last May to bolster its institutional business. The company also bought French consumer startup Storm Inc. and Magic Carpet, a machine learning and AI company, in October. 

Mergers and acquisitions within the crypto sphere accelerated last year, a trend that industry watchers have predicted will continue in 2022. M&A deals involving at least one company in the crypto sector totaled 169 in 2021, as of mid-December, compared to 59 deals in the year prior, according to data from M&A advisory firm Architect Partners. 

There is no shortage of ideas and teams within the crypto space, Kasselman explained, but many struggle to attract users.

“Everyone wants to move fast in crypto, and it’s really hard to move fast unless you have access to a big customer account,” he said. “I think we’ll see a lot of rapid consolidation, especially if the market continues to be a little less hot.”

Bitcoin’s price was at about $41,300 at 1 p.m. ET, according to CoinGecko, a decrease of roughly 13% from seven days ago. 

SkyBridge Capital Founder Anthony Scaramucci previously said he expects that a big bank frustrated by the growth of decentralized finance could buy a crypto firm such as Coinbase. 

Though some banks have dabbled in crypto by offering clients indirect exposure to the asset class, Kasselman noted that such a transaction, or one involving a large traditional firm buying Blockchain.com, is unlikely in the current regulatory environment.

“I do think we are at the beginning of what is a two-year cycle of a permanent regulatory framework being established across the US and the EU, so it’ll look very different in a couple of years,” Kasselman said. “But right now it’s very hard for those sort of old, stoic, publicly traded companies to think about entering a space…that doesn’t really have clear rules.”

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