National Post (National Edition)
Coinsquare doubles down on growth
The “great crypto crash.” A “rout.” A “meltdown.” That’s how the business press described the drop in cryptocurrency values last month — just as Coinsquare listed two new ETFS on the Toronto Stock Exchange.
But that doesn’t seem to ruffle CEO Cole Diamond. In fact, he says the Canadian company has further plans for expansion, including its cryptocurrency mining operations. According to a February report from Coherent Market Insights, that alone is set to be a $38-billion (U.S.) global market by 2025.
Diamond also believes that the gap between traditional finance and cryptocurrency, already closing fast, will eventually disappear.
He predicts cryptocurrencies will become a platform for all assets, from equities to land rights. If anything, he’s worried Coinsquare isn’t moving fast enough.
“We are planning everything that a financial institution does, everything that a stock exchange does, and everything that we can possibly participate in with the overall management of assets,” he says.
But Diamond understands building trust in cryptocurrency remains a big part of the equation. His own first encounter with Coinsquare, in 2016, was a face-to-face meeting with founder Virgile Rostand — to make sure the firm’s back-end was solid before making a hefty purchase of digital coins.
He was so impressed by what Rostand had built, however, and so confident in the company’s potential, that he became an investor and joined as CEO the following year. Since then, he’s helped Coinsquare evolve from what he calls “a website that was really dark and scary looking” to a digital asset management company with $60 million in funding. The company has also secured an official relationship with a big five Canadian bank — reportedly BMO — and completed an audit with an accounting firm.
For retail investors wary of the volatile market in cryptocurrencies, Coinsquare’s ETFS may also offer the chance to spread risk across related assets. Created in partnership with Deutsche Borse Group’s index provider STOXX, its Yewno Developed Markets Blockchain Index includes companies that have based their products and services on blockchain technology. Another, called “B.R.AI.N,” covers companies engaged in biotech, robotics, artificial intelligence and nanotechnology.
The launch is just one in a series of aggressive moves by Coinsquare. The company is targeting institutional investors (including banks) through its subsidiary Coinsquare Capital Markets, which offers pricing, buying and selling tools similar to what professionals use for foreign exchange or equity trades.
By the end of this year, the company plans an expansion into Europe, eventually targeting every country in the trading bloc aside from the United Kingdom, which remains in turmoil over Brexit.
“Given the size of the union, which is collectively 12 times Canada’s GDP, we have an enormous marketing opportunity to expand our geographic base,” says Diamond.
Comfort with regulatory frameworks in Europe helped steer the company’s expansion there. Cryptocurrencies are governed by complex anti-money laundering and securities trading rules, says Diamond, but Coinsquare plans to tackle each country’s laws separately.
In addition to operating abroad, Coinsquare is licensing its software for use in foreign markets. In July, Vancouver-based blockchain investment bank DLT 21 signed on to launch a cryptocurrency exchange in Japan using the company’s platform.
Mining still more cryptocurrency is also critical to Coinsquare’s long game. The company has signed an agreement with an as-yet unnamed power utility and plans to build its own facility.
Crypto mining is a competitive field. A number of other Canadian companies — tempted by cheap power and a stable economy — have set up operations. These include Hashchain Technology, Hive Blockchain Technologies (formerly gold exploration company Leeta Gold) and Hut 8.
But Coinsquare’s cryptocurrency mining model is distinct. Rather than just mining its own cryptocurrencies, it will lease space in the new facility to customers with their own computers. It has one large anchor customer already lined up to take the lion’s share of that capacity, says Diamond.
Coinsquare is planning to launch an international mining pool as well, an electronic club which allows independent parties to combine mining power and split the proceeds. Like mining, pools are a crowded market. But Diamond says this collective will be distinguished by transparency.
“There’s no clarity in what the pool operator is currently making,” he says of other mining pools. “You just accept what comes out at the other end.” By contrast, Coinsquare will publish its margins.
Diamond hints at more to come.
“Our secret sauce is what we’re building,” he says. “Not what we have.”