Backpack’s Acquisition of FTX EU: A New Era for European Crypto

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Backpack's acquisition of FTX EU assets navigates European crypto regulations, highlighting compliance, regulatory scrutiny, and future plans for Backpack EU.

Backpack just announced that they’ve acquired FTX EU’s assets. I mean, wow, right? After all the regulatory hurdles and approvals, this is a big deal. But what does it mean for FTX EU customers? And what will Backpack EU do now? Let’s break down this whole thing.

What We Know About the Acquisition

Backpack Exchange recently completed the acquisition of FTX EU’s assets. The entire process took months of regulatory scrutiny and approvals, officially wrapping up in June 2024 when CySec, the Cyprus Securities and Exchange Commission, gave the thumbs up. This is a huge step in the cross-border crypto asset game, especially given how tight regulations can get in both the U.S. and the European Union.

The Regulations at Play

The European Union’s Rules

In the EU, the crypto scene is mostly governed by the Markets in Crypto-Assets (MiCA) and the Transfer of Funds Regulation (TFR). MiCA tries to create a level playing field for crypto-asset markets, putting requirements on both issuers and service providers. They need to register with the EU and follow specific rules, like warning consumers about risks and preventing market manipulation. TFR makes it a requirement for service providers to include info about the originators and beneficiaries of crypto-asset transfers, which helps with traceability and anti-money laundering.

The U.S. Rules

Now, over in the U.S., things are less straightforward. The IRS has rolled out new tax reporting rules for digital asset transactions and the SEC is doing its best to shape the landscape with litigation, like the Ripple Labs and Coinbase cases.

Cross-Border Compliance Issues

Navigating through these differing regulations is no walk in the park. The EU has a cohesive framework, while the U.S. is all over the place. This can make compliance a real headache for anyone trying to operate across borders.

FTX’s Take on the Acquisition

FTX has a few things to say about the situation. They pointed out that Backpack’s acquisition of FTX EU isn’t approved by the U.S. Bankruptcy Court. Also, Backpack didn’t have FTX’s permission to distribute any funds to FTX customers, including those who held accounts with FTX EU.

They also mentioned that the court-approved transfer of FTX EU shares to Backpack didn’t happen before Backpack’s official announcement on January 7, 2025. The U.S. Bankruptcy Court wasn’t involved in this whole transfer situation. FTX also stated that they hadn’t checked any communications by Backpack regarding asset recovery for former FTX EU customers.

Backpack’s Response

Backpack is standing its ground, asserting that the acquisition was fully compliant with legal and regulatory frameworks. They clarified that the transfer of FTX EU assets was supervised by the bankruptcy estate and that all necessary payments were made as per the purchase agreement.

How the Acquisition Went Down

The acquisition took several months to unfold. The sale of FTX’s European assets, including FTX EU, was approved by the U.S. Bankruptcy Court in early 2024, part of the effort to settle FTX’s assets. The transaction closed in May 2024, with FTX insiders acquiring the assets before Backpack bought them from those insiders. The deal was completed in June 2024, as confirmed by publicly available court records.

But it didn’t stop there. Backpack needed the green light from CySec, and after a thorough due diligence process, CySec approved the acquisition in December 2024. This officially handed Backpack the European division of FTX, with the responsibility to redistribute any owed funds to former FTX EU customers.

What Lies Ahead for Backpack EU

The newly acquired platform, now called Backpack EU, is set to launch in early 2025. They’re going to offer a whole range of cryptocurrency derivatives, including perpetual futures, across the EU. This fits into the larger trend of crypto exchanges wanting to expand into the European crypto market, especially with MiCA offering them a solid regulatory framework.

Compliance at the Forefront

Backpack is emphasizing its commitment to a secure and transparent trading platform. They say they’ll follow the rules laid out by MiCA and TFR, including consumer protection measures and compliance with EU regulations.

Building Customer Trust

By securing the required regulatory approvals and ensuring compliance, Backpack aims to build trust with its customers and create a safe environment for trading virtual currency transactions. They want to address the concerns of former FTX EU customers, making sure their funds will be handled responsibly.

Summary

Backpack’s acquisition of FTX EU is a big step in the European crypto market. It’s a complicated process filled with regulatory challenges and approvals, but it’s also filled with potential. The commitment to regulatory compliance and customer protection will be crucial as Backpack EU prepares to launch its operations.

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