Benzinga - Following the collapse of FTX, good news in crypto has been scarce. Often now, it is regulatory enforcement making the headlines.
That changed yesterday when Kevin O’Leary shared with Benzinga that WonderFi has merged with Coinsquare and CoinSmart to create Canada’s largest regulated crypto asset trading firm. The combined entity offers nearly 2 million retail and institutional users crypto trading, staking and B2B payment processing.
“It turns out that the bet I made up in Canada was right,” he said, adding that slow and steady worked in WonderFi’s favor. “My theory was that at some point, the regulators in major markets would require compliance. Enforcement was weak right up until the FTX collapse and, now, has accelerated with last week’s Binance charges.”
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WonderFi is among the last remaining crypto firms in North America that sought to seed a global expansion through compliance and scale first at the regional level. O’Leary recalls its ambitions coming off as a bit far-fetched; hence, his diversification and capital allocation to other firms like FTX.
Since FTX’s fall, the investor says he’s learned some lessons. The regulators are tired of rogue operators, and there needs to be increased transparency and auditability. Firms that haven’t found a place to operate on a regulated basis are likely to close shop.
“I am on the other end of the storm and am much wiser now. I left Washington with a perspective that will guide my investment philosophy for years. If you don’t have scale, I don’t think you’ll survive because you won’t afford the compliance cost.”
In short, the window of opportunity has shrunk. Failure to comply in North America leaves little room for recourse. Regulators elsewhere are likely to follow their North American counterparts, meaning WonderFi is of the few that’s in the clear to play globally.
“WonderFi’s built a franchise of over 32 different tokens,” O’Leary explained. “They have 1.6 million accounts, as well as digital payments, staking, and IIROC licenses.”
Accordingly, though it’ll take time for investors to get naturally enthused about crypto again, O’Leary thinks WonderFi is in a better position versus Binance or Coinbase Global Inc (NASDAQ: COIN) to address its future interest.
“I think the Canadians are the shining model of what will happen in other geographies. My auditors and compliance department can mark-to-market positions daily, just like they do in our equity and bond portfolios. The Bitbuy, Coinsquare and Coinsmarts are proven platforms with licenses, and that will attract institutional investors.”
While hunkered down and working on his investment methodologies, O’Leary added that deals are few and far between, with the most exciting conversations around compliant payment systems and FDIC insurance of stablecoins.
“One baby step at a time,” he ends. “I am far more realistic about investing in this space, and I have zero interest in putting my money into anything that doesn’t have a path to 100% compliance with its regulators.”
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