The deal appears to give Binance control of Eqonex through a convertible loan worth $36 million. Binance is providing the loan via its newly launched payments technology company Bifinity, also announced today.
The loan has an 18-month maturity, and its initial conversion price is $1.89 per share, about 16 cents above Eqonex’s current share price.
While Binance doesn’t say the loan gives it — or Bifinity — control of Eqonex, Eqonex’s own announcement says Bifinity will have the right to appoint its chief executive officer, chief financial officer and chief legal officer and nominate two seats on its board of directors.
Binance has formed Bifinity to provide fiat on- and off-ramp services to itself and other businesses. Bifinity has been Binance’s official on-ramp partner since late last year, but Binance only officially announced its launch today. Bifinity has also partnered with Paysafe and Checkout.com to help merchants adopt crypto. Eqonex says Bifinity is registered in Lithuania as a crypto wallet service provider.
As for Eqonex, it was founded in 2020 in Singapore and describes itself as the first digital asset firm with an exchange to be publicly listed in the US. It provides crypto trading, custody and asset management services to clients. It operates the Eqonex crypto exchange, the Digivault custodian and the Bletchley Park Asset Management unit.
Why do UK regulators seem unhappy?
Eqonex’s Digivault unit is registered with the UK’s Financial Conduct Authority (FCA) for the purposes of avoiding money laundering. The regulator, in a statement today, said that parts of Binance Group may have become beneficial owners of Digivault following the deal.
The regulator went on to say that it did not have powers to assess the fitness and propriety of the new beneficial owners or the change in control before the transaction was completed. But it “can take steps to suspend or cancel the registration of a cryptoasset business if it is not satisfied the firm or its beneficial owner is fit and proper.”
“The FCA also has powers to suspend or cancel a firm’s cryptoasset registration on a number of grounds, including where a firm has not complied with obligations under the Money Laundering Regulations,” it added.
A Binance spokesperson did not comment to The Block when asked if Binance or Bifinity gets ownership control in Eqonex as part of the deal but directed us towards the Eqonex announcement. When asked about the FCA’s statement, the spokesperson said, “We note it with interest and look forward to continuing the dialogue with the FCA.”
This is the second time the FCA has shown concerns about a crypto deal in recent weeks. Late last month, the regulator issued a similar statement after Bitpanda, an Austrian crypto exchange, acquired Trustology, a DeFi custodian regulated by the FCA.
Bitpanda, however, is “confident that no issues with the acquisition will arise.”
“We have a very good working relationship with the FCA who was informed of that transaction well in advance and the FCA statement was in accordance with Bitpanda’s expectations,” it told The Block at the time.
That’s a strikingly different statement from Binance’s. It remains to be seen whether the FCA will take any action against either of the two deals.
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