Kraken has acquired Backed Finance, a Swiss platform that specializes in transforming real-world assets into tradable cryptocurrency tokens. This strategic move enhances Kraken's control over tokenized stocks and exchange-traded funds (ETFs) already listed on its platform and signifies its intent to further develop around-the-clock equity trading powered by blockchain technology.
Backed Finance issues crypto tokens that are directly backed one-to-one by the actual securities they represent. This means that when a user purchases a tokenized share, it is intrinsically linked to the underlying real asset held in custody.
While Kraken has not disclosed the financial terms of the acquisition, Arjun Sethi, Kraken's co-CEO, emphasized that the company's focus is on substantial, long-term investment rather than speculative trends. "While everyone is talking about tokenized equities, we are just doing it," Arjun stated. "We are focused on long-term investment, not hype."
The acquisition will allow Kraken to streamline Backed's tokenized assets, including its xStocks product, directly into its core systems, building upon existing offerings.
Kraken Strengthens Token Trading with Backed's xStocks
Backed Finance is currently the second-largest platform for tokenized stocks, holding approximately 23% of the market share and offering over 60 tokenized equities and ETFs under the xStocks banner. These tokens are designed to be fully collateralized by their underlying securities, providing traders with crypto versions of stocks that function similarly to traditional shares. A key advantage is their availability for trading at any time, including weekends and holidays, unlike conventional stock markets.
The trend of tokenizing assets is gaining momentum, with major financial institutions participating. BlackRock, the world's largest asset manager, has launched a tokenized money-market fund valued at over $2.3 billion. Other centralized exchanges have also introduced their own tokenized stock and ETF offerings this year, capitalizing on the demand for continuous access and enhanced collateral flexibility.
Kraken, recently valued at approximately $20 billion following a funding round, is clearly positioning itself for significant growth, with plans for a public listing in 2026. The acquisition of Backed Finance marks Kraken's fifth acquisition this year, aligning with its broader expansion strategy. Founded in 2021, Backed Finance's xStocks product will now be integrated natively into Kraken's infrastructure, expanding its reach.
Crypto IPOs Face Challenges Amid Market Downturn
This acquisition occurs at a time when the cryptocurrency Initial Public Offering (IPO) market is experiencing considerable pressure. Since Bitcoin's peak in October, the total cryptocurrency market has seen a reduction of over $1 trillion, creating a challenging environment for new listings, particularly for companies that pursued IPOs earlier in the year.
In the United States, IPOs that raised more than $50 million, excluding special purpose acquisition companies (SPACs) and closed-end funds, have seen an average decline of 5.3% this quarter. In comparison, the S&P 500 has recorded a gain of 0.9% over the same period.
The performance of five crypto-related companies that went public this year has been notably weaker, with an average decrease of 31% in their stock value this quarter alone. Gemini Space Station Inc., co-founded by Tyler and Cameron Winklevoss, which went public in September at $28 per share, experienced a 14% drop by the end of the third quarter.
eToro's shares fell by more than 20% between May and September. Even Bullish, the institutional exchange operated by Tom Farley, has seen its stock price decline by 38% since October.
The market downturn has impacted even companies with strong initial openings. Circle Internet Group Inc., which debuted in June, has seen its share value decrease by approximately half. However, some companies, including Circle and Figure Technology Solutions Inc., a blockchain credit platform, are still trading above their respective IPO prices, albeit narrowly.
One positive consequence of the market volatility has been an increase in Bitcoin trading volumes. Over the past 14 days, average trading volume has reached its highest point since March, providing a short-term benefit to exchanges like Kraken.
Despite these trends, bankers aiming to finalize IPO deals before the end of the year are facing diminishing opportunities. Some companies have already postponed their public offerings. John Foraker, CEO of Once Upon A Farm PBC, announced on LinkedIn that the company will not proceed with its IPO until 2026, citing delays attributed to government shutdowns.