Fintech, cryptocurrencies, and mergers and acquisitions will overlap significantly in the coming year. M&A activity is expected to recover quickly – more than 60% of CEOs of major companies surveyed by FTI Consulting agree for their February report that their company has recently been the target of aggressive M&A activities, and 39% say companies look at mergers and acquisitions. As the result of the COVID-19 pandemic. At the same time, the cryptocurrency market is gradually approaching a natural adoption.
As a result, the number of agreements related to assets and cryptocurrency valuations will likely increase during 2021. While this trend is likely to drive exciting developments in the financial sector, it has also begun to raise unique questions about cryptocurrencies and this complex business model. It can be accurately measured and verified in relation to the agreement.
Digitizing the global economy
The impact of the COVID-19 pandemic has led to a significant shift from physical to digital services across a wide range of industries – no more dramatic than in the financial industry, with an estimated $ 420 billion in transaction value estimated at $ 7 trillion, according to S&P Global. On digital cards and payments by 2023 and will reach $ 48 trillion by 2030.
On the topic: How has the COVID-19 pandemic affected the crypto space? Expert response
PayPal legalized the cryptocurrency when it began accepting it in November 2020, and announced its acquisition of the Israeli cryptocurrency Startup Curv in March. Visa has also been active in the fintech space, most recently with its $ 5.3 billion acquisition of Plaid in January. Investors are also watching the developments following Coinbase’s debut on the Nasdaq exchange. Of course, all this activity generates a lot of interest in fintech companies and cryptocurrency companies among traditional financial institutions and big tech companies. Even in the middle of the lower market in the first half of 2020, cryptocurrency mergers and acquisitions totaled $ 600 million, more than the whole of 2019. All signs point to a more significant year in 2021.
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The need for due diligence
Of course, with mergers and acquisitions, listing on the stock exchange and raising capital also entails the need for due diligence and market assessments and assessments. However, when cryptocurrency is used as a primary asset or a significant resource, there are several complex layers of standard due diligence processes.
Target buyers and companies should consider making a technical assessment of the digital assets in use. Potential buyers will want to know how to verify crypto assets and ensure that the assets of the target company are accurate. Since cryptocurrency companies often operate according to unconventional business models and due to the nature of distributed ledger systems, it is not always clear what it is. The essence of the problem is to inquire about any concerns, risks, or inaccuracies in the crypto assets, the structure and business model of the target company, and whether it has the correct procedures in place to support its cryptocurrency activities.
Likewise, cryptocurrency companies looking to raise money or sell their business to a major tech or finance company (or apply for a listing) can help locate their business by doing a thorough assessment that shows their differences and value to potential buyers. Support for follow-up evaluation and due diligence.
The nuances of the encryption room
Many people may not realize the importance of a technical assessment and a cryptocurrency valuation as part of greater financial due diligence, or that it is possible. However, experts in the field have begun to develop cutting-edge methods for conducting rapid, comprehensive and cost-effective technical assessments of cryptocurrency assets and using digital forensic techniques to test and verify digital wallet ownership, digital asset ownership, and verification of held assets. ; The value and validity of the assets.
When conducting a technical assessment focused on cryptocurrencies, buyers should explore the following many areas:
A full suite of digital assets including hot wallet services, cold wallet storage services, business portfolio services, wallet management and other services.
Size, location, responsibilities, and other important details related to technical support, sales support, and development teams.
The risks associated with contracts related to cryptocurrency, privacy, security, knowing your customer, money laundering, signatures, and other control policies.