Increasing adoption and the expansion of the cryptocurrency universe is spurring M&A activity across Asia-Pacific, as dealmakers sink their teeth into the key building blocks of next-generation digital infrastructure.
The value of crypto M&A deals in the region hit an all-time high in 2021, topping USD 6.7bn from 73 transactions, according to data from Dealogic. This dwarfed the USD 209m across 50 deals logged in 2020, and represents almost three times the previous record of USD 2.5bn via 78 deals registered in 2018.
This virtual gold rush, mirroring the rally in crypto prices to all-time highs, has enabled Asia-Pacific to solidify its position as the second-biggest market for cryptocurrency, accounting for 19.9% of total global transactions in 2021, trailing only the Americas, with USD 23.9bn of deals and a dominant share of 71.4%.
Looking at total deal size in APAC, Singapore accounted for the lion’s share at USD 4.57bn or 68.78%, while Japan recorded the highest transaction count at 33 or 45% of the 73 deals.
New kids on the block: digital payment firms are hot property
The acquisition of a 51% stake in digital asset exchange services group Bitkub for THB 17.9bn (USD 536.6m) by Thailand’s oldest bank, Siam Commercial Bank [BKK:SCB], sealed the biggest deal in APAC’s crypto space last year. Another notable tie-up saw South Korean entertainment company HYBE [KRX:352820] land a 2.5% holding in domestic cryptocurrency exchange operator Dunamu for KRW 500bn (USD 424m). In return, Dunamu is to invest KRW 700bn in HYBE to develop artist IP and non-fungible token (NFT) technology. Large strategic companies delivering entertainment and content are likely to make more active moves to unlock the potential of blockchain technology, which is still in its infant stage, according to one sector advisor.
Investors are also getting bolder despite recent sharp falls in prices and ongoing regulatory uncertainty. Indeed, 2022 is off to a strong start, with crypto M&A deals climbing to USD 2.5bn in value in the year to date (YTD), helping drive Asia-Pacific’s share to 28.8% of total global deal value, per Dealogic. Hong Kong-based crypto finance firm Amber Group, Australia-based NFT start-up Immutable and Dunamu all completed nine-digit funding rounds to start the year in order to finance expansion programs.
The rise of digital payments, and the huge number of underbanked and unbanked populations, are super-charging the adoption of cryptocurrencies across Asia-Pacific. The emergence of nascent concepts such as NFTs, decentralized finance, Web 3.0 and the metaverse - the foundational technologies of a virtual future - will only expand the universe of potential M&A targets, as investors and companies jockey for position to capitalize on the digital revolution.
The crypto space will continue to consolidate, says a PwC report in February, led by later-stage crypto companies embarking on M&A to boost geographic and product expansion, while accelerating regulatory and licensing strategies.
According to Mergermarket, companies that will lead M&A in the crypto space are Hong Kong-based games developer and publisher Animoca Brands, which is seeking acquisitions to develop its Web 3.0 ecosystem, and Amber, which is on the hunt for firms involved in payments, wallets, and trading. Binance, a China-based blockchain and cryptocurrency infrastructure provider, says it is exploring M&A opportunities to facilitate its entry into new markets.
