Bitkub deal likely to hurt small cryptocurrency operators

Bitkub deal likely to hurt small cryptocurrency operators

SCBx chief executive and chairman of the Executive Committee Arthid Nanthawithaya (right) and Bitkub Capital Group Holdings Co Group chief executive and founder Jirayut Srupsrisopa. SCBx recently announced an investment in Bitkub by acquiring 51% of Bitkub's total shares from Bitkub Capital Group Holdings, in a deal worth 17.8 billion baht.
SCBx chief executive and chairman of the Executive Committee Arthid Nanthawithaya (right) and Bitkub Capital Group Holdings Co Group chief executive and founder Jirayut Srupsrisopa. SCBx recently announced an investment in Bitkub by acquiring 51% of Bitkub's total shares from Bitkub Capital Group Holdings, in a deal worth 17.8 billion baht.

SCBx Group's acquisition of Bitkub looks likely to cause pain for small cryptocurrency operators as it may significantly boost the exchange's market share, which currently stands at 90%, thanks to the bank's large capital reserves and customer base.

Analysts expect SCBx to enjoy 1 billion baht in Bitkub profits during next year alone.

After the acquisition was announced, SCBx's shares closed on Wednesday at 131.5 baht, up 1.15% on the Stock Exchange of Thailand, while Bitkub's KUB Coin rose 84.2% to an all-time high of US$2.49.

Thai Fintech Association president Choladej Khemaratana said SCBx's acquisition of Bitkub Online will allow the bank to enter the sector immediately and lead to more cross-sales of the companies' large customer bases.

The bridging of the two customer bases will greatly amplify their trading values and market size, he said.

The Thai digital asset market has seen rapid growth this year as hopes of wild gains have lured a new generation of investors into the market.

According to Mr Choladej, Thailand now has about 1.6 million digital asset trading accounts.

"Personally, I think Bitkub has sold its shares at the right time as it is now the peak of the crypto market. It is common for startups to make some profits when their businesses are growing," Mr Choladej said.

Sam Tanskul, managing director at Krungsri Finnovate (KFIN), a corporate venture capital arm under Bank of Ayudhya, said KFIN invests in Thai cryptocurrency startup Zipmex, which also offers an exchange platform service. Digital assets would expand the bank's new business opportunities.

"The bank also plans to recommend wealth customers gradually allocate their investment portfolio in digital assets to contribute better returns in the digital era," Mr Sam said.

Zipmex plans to raise funds in another series D round next year, and KFIN also plans to increase its stake in the startup.

Meanwhile Niran Pravithana, chief executive and founder of Ava Alpha Lab, also voiced his opinion on Facebook that SCBx's acquisition of Bitkub is a clear example of how traditional banks can avoid digital disruption and adapt themselves to the world of fintech and blockchain technology.

He said traditional financial institutions are unlikely to be disrupted or disappear from the financial world because they have the capacity to spend huge amounts of money on tech startups.

Banks that will be disrupted are those that cannot change or are unwilling to change, and now is the time for all financial institutions to begin looking for opportunities to adapt to technological changes, he said.

Securities analysts have a positive outlook on SCBx shares, and expect the acquisition to generate around 1 billion baht of profits for SCBx next year and create a long-term business synergy for the SCBx Group.

According to Asia Plus Securities (ASPS), Bitkub generated 3.3 billion baht of revenue and 1.5 billion baht of net profit in the first nine months of the year.

The broker said Bitkub will record an estimated annual profit of about 2 billion baht, of which about 1 billion baht will represent profits for SCBx, or 3% of SCBx's 2022 earnings forecast.

Strategically, Bitkub's integration with SCBx should enhance the company's system development and strengthen customer bases for both, ASPS analysts said.

The broker recommends buying SCBx shares, giving the base price in 2022 at 140 baht per share from the development of fintech businesses, which is expected to support long-term return on equity and is a factor that will raise the shares' price per book to over 1 time from the current 0.95 times.

Bitkub has also previously revealed plans to list its shares on SET, which will indirectly enhance the value, or capital gains, for SCBx in the future.

An analyst at a commercial bank said she believed SCBx's acquisition of Bitkub reflects SCBx's plan to expand its wealth management business and focus on younger customers, who pay attention to digital asset investments rather than investments in traditional assets.

Therefore, SCB's synergy with Bitkub is a way of expanding the business and customer segment, the analyst added.

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