The European division of a cryptocurrency exchange, previously at the center of a major scandal in 2022, has undergone a recent acquisition. The firm known as Backpack has acquired this entity, which was once operational under the name FTX EU.
Currently, Backpack is positioned at a relatively low rank in the cryptocurrency exchange landscape, sitting at 200th place by daily trading volume, according to CoinMarketCap. The firm aims to leverage the acquisition to enhance its operations, particularly as it now holds a MiFID II license. However, growth may not occur as swiftly as Backpack hopes.
FTX EU held a license from the Cyprus Securities and Exchange Commission (CySEC) as of September 2022, allowing for the passporting of its services throughout the European Union in compliance with MiFID II regulations. Backpack has announced that both the acquisition and the related regulatory approvals from the bankruptcy court and CySEC have been secured. The plan includes introducing crypto derivatives and perpetual futures to the European market—products that are not currently available through local regulated exchanges.
A significant hurdle remains, however, as CySEC has suspended the FTX license following the exchange’s collapse, and the suspension has been repeatedly extended. The latest extension was confirmed on November 5th. While Backpack expresses optimism about reactivating the license and launching its services by the first quarter of 2025, official documents show that the suspension is likely to extend until at least May 30, 2025.
During the suspension period, Backpack is not permitted to offer investment services or onboard new clients. The regulatory body has only allowed for the return of funds to affected clients from the FTX collapse.
Additionally, Backpack is taking on the responsibility of managing the bankruptcy proceedings for FTX and handling claims from its former clients. The company stresses that restoring customer trust by promptly reimbursing FTX EU customers is vital.
Backpack is not one of the largest exchanges in the sector but managed to raise $17 million in a Series A funding round earlier this year, elevating its total valuation to around $120 million. The acquisition itself garnered interest from other prominent players in the market, including Coinbase, showing the significance of this move within the industry.
The collapse of FTX was swift and shocking, occurring within a span of ten days in November 2022, following a report by CoinDesk that exposed dubious financial practices. Key issues included the revelation that Alameda Research, closely linked to FTX, had significant assets tied up in FTX’s own exchange token.
This loss of confidence led to severe consequences, including a rapid withdrawal of customer funds, an $8 billion deficit, and ultimately, a Chapter 11 bankruptcy filing on November 11, 2022. The founder of FTX was later convicted for misusing customer deposits. After an extensive management takeover aimed at restructuring the company, it was announced that FTX would cease operations and instead focus on asset liquidation to repay its creditors.
Before its downfall, FTX had initiated its European operations earlier in 2022, receiving preliminary approvals from CySEC and later securing a full CIF license in September of that year. The regulatory framework and future outlook for crypto exchanges in Europe continue to evolve in light of recent events and acquisitions, suggesting a cautious yet optimistic approach from newer entrants like Backpack as they strive to restore and thrive in the market.