The ambitions of Binance Holdings Ltd., the world’s biggest crypto exchange, to pull off the audacious takeover of its embattled rival FTX.com could partly hinge on the scrutiny of global antitrust regulators.
(Bloomberg) — The ambitions of Binance Holdings Ltd., the world’s biggest crypto exchange, to pull off the audacious takeover of its embattled rival FTX.com could partly hinge on the scrutiny of global antitrust regulators.
Binance announced it’s in the process of acquiring its rival FTX in what would be a radical consolidation of power in the crypto world. Although the letter of intent made public yesterday is non-binding, the potential deal has already rung alarm bells for legal experts as combining crypto’s two top players could dent competition in the ecosystem.
“Binance and FTX are two of the most significant crypto exchanges, and Binance is already the largest player, so you’d expect that competition authorities would want to investigate their deal,” said Tom Smith, a lawyer at Geradin Partners and former legal director of the UK’s Competition and Markets Authority.
Although Binance has not revealed where it is based, this doesn’t matter for most countries’ merger control regimes. Scrutiny depends on the basis of where the customer of its sales is located and the companies revenue. This means that the US, UK, and EU regulators could all potentially open probes into the deal.
“I would be surprised if the companies were to obtain the green light from all jurisdictions before the end of 2023,” said Thibault Schrepel, associate professor at VU University Amsterdam and faculty affiliate at Stanford University. Schrepel said it would be likely that a number of agencies would open in-depth probes, which could result in concessions such as selling off parts of the firms.
It’s likely that one of Binance’s main arguments to get the OK and forgo any remedies would be the “failing firm defense” — meaning they’ll say FTX would not have survived without the merger. However, a sticking point will be Binance’s possible role in the financial difficulties of its takeover target, following its announcement about plans to offload its FTX token holdings earlier this week.
Binance and FTX didn’t immediately respond to requests for comment.
What’s clear is that this deal will mean global antitrust regulators will get the chance to look at a nascent market that has yet to be substantially analyzed through a competition lens. Schrepel said there hasn’t yet been a decision by an antitrust regulator that has defined the market at stake.
Moreover, agencies could have a chance to not only look at the deal’s impact on the cryptoexchange market “but should also consider whether the deal will indirectly reduce the competitive pressure within blockchain ecosystems, for instance, whether the deal impact investments in the space,” Schrepel said.
Exchange deals have a fraught record when it comes to antitrust clearance. A decade ago, the European Commission blocked Deutsche Boerse AG’s acquisition of NYSE Euronext, saying the $9.5 billion deal would have created a ‘near-monopoly” in European exchange-traded derivatives.
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