Regulatory guidance on cryptoassets and digital currency companies may lead to a legitimisation of crypto-businesses as an investable asset class.

By Stuart Davis, Sam Maxson, David Walker, Tom Evans, and Catherine Campbell

Recent and upcoming regulatory guidance on cryptoassets and the regulation of companies engaged in digital currency, such as issuers, crypto-exchanges, crypto-custodians, crypto-brokers, and other service providers, could help facilitate private equity investment in this space. While there has been some institutional investment in crypto-businesses — such as Goldman Sachs’ investment in Circle (owners of the Poloniex crypto-currency exchange) and Tiger Global’s investment in Coinbase — this has been a relatively nascent market with most money coming in the form of early-stage and venture investing.

By Christian McDermott

In recent years, PE firms have been paying to play in the payment processing sector. From Worldpay and Nets, to Bambora and Paysafe, payment processing companies have proven to be attractive investments for European PE. In our view, a wave of regulation in the FinTech sector will unleash further growth potential, and PE firms may be well-positioned to take advantage of this.

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The number of M&A transactions in the payment services industry has increased in Europe over the past five years, and we believe the sector will remain hot. A wave of regulation has been designed to stimulate competition and encourage new market entrants. Chief among this is EU Directive (EU) 2015/2366 on payment services in the internal market (known as “PSD2” since it replaces the existing EU payment services directive).