Coincheck, exchange which suffered $523 million NEM hack, has been acquired
Japanese exchange Coincheck has been fully acquired by Monex Group, a Japanese brokerage firm, for 3.6 billion yen ($33.5 million). The group, listed on the Tokyo Stock Exchange, had 4,229 billion yen ($39 billion) in assets under custody as of March 2018, and claimed to have 1.8 million accounts during the same period.
As a reminder, in January 2017, $523 million worth of NEM was stolen via a hack from Coincheck, making it the largest crypto-related hack to date. The crisis led to the Financial Security Agency responding, by taking action against cryptocurrency exchanges which did not implement proper measures to secure clients’ assets, or which did not have the mandatory licences to operate in Japan such as Binance which decided to leave the country to set up shop in Malta.
The acquisition is strategic and aims to expand Monex’s operations within a new asset class, with the group benefiting from synergies, enabling a reduction in margin ratios – as costs related to customer services, human resources, and marketing, among others, would decrease in relation with the company’s size. Additionally, as shown in the graph below, Monex struggles to generate profit; therefore, expanding its operation within the cryptocurrency market, may give Monex’s bottom line some breathing room.
According to a press statement released at the time of the deal’s announcement, Coincheck ended its fiscal year with a revenue of 980 million yen ($9 million), and a net income of 471 million yen ($4.4 million) – an impressive profit margin of 48%, despite Coincheck currently refunding the stolen money to its clients. The question for Monex’s shareholders, however, is whether the exchange’s reputation hasn’t been tarnished to such an extent that investors would go to the competition. However, it is worth noting that the stock market has already reacted positively to the news. The moment the announcement was made public, the price of Monex’s shares climbed by 20% despite the Nikkei 225 being flat, meaning that the deal was warmly welcomed by investors.
Ref: Google Finance
Despite not being as important as the acquisition of Poloniex by Circle, we see this acquisition as highly positive for the cryptocurrency market as a whole. The fact that the parent company Monex is listed on a stock exchange, obliges them to be transparent regarding their operations and to perform regular audits. Ultimately, the deal will enhance the exchange’s governance and internal controls, which in turn should reduce the likelihood of situations such as the hack from repeating themselves.
Jacek graduated with an M.A. in Finance from the Shanghai University of Finance and Economics. He lived in Europe and Asia, and always loved to dig into papers and research projects to really understand the key drivers and trends. He’s passionate about blockchain’s business application, the sharing economy, and FinTech.