The annual trading volume is less than the daily trading volume of Coinan, why BC Technology can still grow revenue for three consecutive years?

On June 2, BC Technology Group made an announcement, announcing a partnership with Standard Chartered Ventures (SC Ventures) to create a joint venture to collaborate on establishing a digital asset broker and trading platform to serve institutional and corporate clients in the UK and Europe.

Author | Liu Xia Editor | Zhao Sheng Typesetting | Wen Xin

On June 2, BC Technology Group announced that it has entered into a partnership with Standard Chartered Ventures (SC Ventures) to create a joint venture to establish a digital asset broker and trading platform to serve institutional and corporate clients in the UK and Europe.

The joint venture will be based in the UK and will initially focus on the European market, matching institutional trading clients with counterparties in the marketplace and providing deep liquidity pools for bitcoin, ethereum and other digital assets. The joint venture is scheduled to launch in the fourth quarter of 2021, subject to regulatory permitting.

What kind of company is BC Technology?

BC Technology, known as BC Technology Group, is a leading public fintech and digital asset company in Asia (stock code: 863HK).

When you think of BC Technology, you can’t get away from Bin Fong and the company Samson Warner.

In 2003, Fang Bin founded Sanzhong Warner Media Co., Ltd. to create a one-stop branding service model for media crossover cooperation. In March 2011, the Group established a holding company in Hong Kong, Brand China Group Limited, with Fang Bin as its Executive Director and Chairman of the Board. At that time, Brand China’s main business was the marketing of automotive and fashion brands in the Mainland, and the company provided advertising services to its clients by relying on Sanzhong Warner Media publications, the company’s own website and other media.

On April 27, 2012, Brand China became the first mainland brand campaign company to be listed on the GEM of the Hong Kong Stock Exchange, and on September 8, 2015, Brand China moved to the Main Board.

Later, with the gradual decline of traditional media and the rise of new media, the Group’s revenue began a five-year downward spiral since 2013 and the Group had to seek transformation. on 23 October 2017, in view of the changes in the media market and the Group’s transformation, the Company decided to terminate or outsource restricted businesses such as self-owned publication operations and made Sanzhu Warner Media a wholly-owned subsidiary of the Group by way of equity acquisition.

In 2018, digital assets emerged and the Group started to expand its digital asset and blockchain technology related businesses, increase related investments and started to provide over-the-counter digital asset trading facilitation services to professional counterparties under the OSL brand [OSL Digital Asset Platform] in late 2018. Since the end of 2018 to date, this type of emerging business has developed rapidly and generated significant revenue for the Group.

Vigorously developing digital asset business to capture market share

BC Technology currently has three core business segments. Of these, the two continental business segments are the Advertising Business Unit and the Campus Management Unit, which provide infrastructure services for international markets. The former provides customized advertising and marketing services for clients in the automotive and other industries, while the latter provides campus operation and management services.

The other core business is the OSL business, which is currently the youngest but rapidly growing revenue share of the digital asset and blockchain platform business. the OSL platform trades in Bitcoin, Ether and other security-based tokens. the OSL platform provides SaaS (Software as a Service) solutions, brokerage services, automated trading platforms and insurance custody services for institutional and professional investors and is currently operating in Hong Kong and Singapore.

Hugh Madden, Group CEO, said, “As the first enabler of licensed regulation in Hong Kong, BC Technology is in a prime position to capture market share with its growing SaaS business.”

In terms of total operating revenue, BC Technology has reversed the declining trend of the past five years since 2018 to achieve three consecutive years of growth. in 2020, the Group’s revenue grew 32% year-on-year to RMB216.5 million and Adjusted EBITDA (earnings before tax, interest, depreciation and amortization) was RMB5 million, a turnaround from negative to positive from -$0.89 million in 2019.

As stated by Hugh Madden, CEO of the Group, the Group’s growth in 2020 is the cumulative result of the last three years of seizing opportunities in the regulated digital asset space. The Company’s digital asset and blockchain platform business, which has been conducted since 2018, continues to grow significantly in revenue and accounts for an increasing share of the Group’s total revenue. in 2020, OSL’s digital asset platform revenue grew 111% year-on-year to RMB151.1 million, a revenue that represents 70% of the Group’s total revenue, compared to only 44% in 2019.

In terms of net profit attributable to the mother, BC Technology has posted a net loss for five consecutive years since 2016. Although the revenue of the digital asset and blockchain platform business has increased year after year during the three years from 2018 to 2020, it still has not reversed the loss situation, but shows a trend of continuous increase in total loss. According to the 2020 annual report, BC Technology’s attributable net loss was as high as RMB 258.9 million, an increase of RMB 13.8 million from last year. In this regard, the main reason given in the company’s annual report is the high warrant fee.

OSL, the only compliant digital asset exchange in Hong Kong

Since 2018, BC Technology has increased its investment in blockchain technology infrastructure, strategically entered the digital asset and blockchain technology space, and formed a professional team with a legal background to deepen regulatory compliance. This transformation of the Group has now been successful and is continuing to strengthen its industry presence. 2019 saw BC Technology join forces with insurance giant Aon Group (NYSE:AON) for a custodian asset level partnership, which also laid the groundwork for its license application submission.

Hong Kong’s regulatory system for crypto assets as a whole takes a steady and prudent approach to moving forward. 2017 saw the launch of a regulatory sandbox, and in November 2019, the Hong Kong Securities and Futures Commission announced a regulatory framework for virtual asset trading platforms, emphasizing that licenses will only be granted to platform operators that meet standards comparable to those of licensed brokerages and automated trading venues. OSL, on the other hand, has moved ahead to the regulatory framework, such as the HKSRC’s requirement that exchange hot wallet assets do not exceed 2% of all client assets and that client assets are covered by insurance, which is consistent with OSL’s previous layout.

As Hong Kong’s cryptocurrency regulatory policies are constantly updated and improved, the regulation of Hong Kong’s digital asset market has marked an important milestone – the issuance of the first digital asset license.

On December 15, 2020, the OSL digital asset platform announced that it had been awarded the first digital asset license by the Hong Kong Securities and Futures Commission, namely License No. 1 (securities trading) and License No. 7 (provision of automated trading services), which is a necessary requirement for a compliant platform in Hong Kong. However, even with a license, it still cannot provide services to retail investors, and OSL’s services are only available to professional investors. Professional investors are divided into high net worth individual investors and institutional investors, and the threshold is not less than HK$8 million for individual assets and HK$40 million for institutional assets.

In addition, OSL implements KYC (Know Your Customer) and KYB (Know Your Business) processes for clients, risk measurement for each client, and ongoing supervision and reporting to reduce risk and possible trading losses.

Closing the size gap and growing rapidly

The axis of time turns back to the day of September 4, 2017, when a storm hit and the digital currency market was in a state of mourning.

On this day, seven departments, including the Central Bank, the Internet Information Office, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the Banking Regulatory Commission, the Securities Regulatory Commission, and the Insurance Regulatory Commission, stepped in to officially call a halt to ICO financing. The notice from the seven departments pointed out that no organization or individual shall illegally engage in token issuance and financing activities, and all kinds of token issuance and financing activities shall be stopped immediately.

Once the announcement came out at 3 p.m., the price of exchange tokens fell all the way down. Among them, the tokens issued through ICO financing fell the hardest, several tokens fell below the issue price, the highest drop of more than 90%. Stimulated by stories of people who were worth millions, tens of millions, and billions of dollars, those who went into the cryptocurrency world with the illusion of a hundredfold or a thousandfold woke up as the most vulnerable group of people at the time.

After the September 4 incident, a number of exchanges, including head institutions such as Firecoin, OK, and Coinan, were investigated and called off because they had been in a grey area for a long time and provided virtual currency trading services directly to ordinary investors in the country. These exchanges also had to move overseas due to compliance regulation issues.

Today, along with the booming digital asset market, the compliance requirements for exchanges are becoming stricter and stricter. OSL has always been very cautious about compliance, and even before receiving its license, the trading services were only available to professional investors.

From the customer portrait, the majority of OSL’s customers are professional institutional investors, with a higher investor threshold, while retail investors make up the bulk of Coin and Firecoin. Institutional investors tend to have large capital and long investment cycles, so their movements are the main factor determining the overall medium and long-term development of virtual assets. No matter now or in the future, capturing professional investors and institutional investors is the only way to capture the main source of growth for virtual asset investment.

From the perspective of trading volume level, OSL is currently far behind the likes of Coinan and Hotcoin. the total trading volume of OSL in 2020 disclosed in BC Tech’s annual report is 149 billion RMB, while the coinmarketcap website shows that the trading volume of Coinan (Binance) in one day is 30.2 billion USD, about 193.5 billion RMB (based on real-time exchange rate), and the trading volume of Hotcoin in one day is also The total trading volume disclosed by Cryptocurrency last year was more than three trillion dollars. In other words, the trading volume of OSL platform in a year is less than the trading volume of Coinan in a day.

In addition to the trading volume, OSL also faces fewer mainstream coins on the shelves, immature STO market, and insufficient liquidity compared to old exchanges such as Cryptocurrency and Hotcoin.

Figure: Binance and Huobi trading volume in the last 24 hours

The annual trading volume is less than the daily trading volume of Coinan, why BC Technology can still grow revenue for three consecutive years?

Chart source: coinmarketcap

However, the growth rate of trading volume on the OSL platform is high. Since launching its digital asset and blockchain business in 2018, it has achieved a rapid growth in business scale in three years, with a compound annual growth rate of 382.2%.

The scale of OSL platform continues to expand, and SaaS will become a strategic focus

By 2020, the total assets of OSL platform grew 487% year-on-year to RMB 2.6 billion, the active users of the platform also grew 130% year-on-year, and the trading volume of the platform grew 228% year-on-year to RMB 149 billion, of which institutional trading volume accounted for 93%.

The annual trading volume is less than the daily trading volume of Coinan, why BC Technology can still grow revenue for three consecutive years?

Source: BC Technology Group Annual Report 2020

OSL’s main source of revenue, and the focus of its business, is the digital asset trading business, which includes brokerage services and electronic trading platforms. . The chart below shows that OSL’s digital asset trading facilitation revenue accounts for 92% of the total revenue for the period.

In 2020, revenue from the SaaS business on OSL’s platform was RMB 8.8 million, including service fees from licensed SaaS customers and trading revenue, an increase of 132% year-over-year. Although this revenue does not represent a significant portion of OSL’s revenue, due to its simple business logic and high reusability, BC Technology says SaaS will be a strategic focus for OSL in the coming months and years.

Currently, OSL’s SaaS business is geared towards institutional clients looking to get involved in digital assets. So far its completed services include a number of Southeast Asian banks or institutions, while OSL is a technology partner of DBS Bank, which previously announced the launch of its institutional custody and trading services.

On June 2, BC Technology’s partnership with Standard Chartered was reached, further illustrating that BC Technology Group’s SaaS services are receiving more and more attention and recognition from large traditional financial institutions.

Regarding the possibility of cooperation with the mainland, compared with Hong Kong, which is more advanced and open in digital asset regulation, the mainland is not yet fully open to digital asset trading and investment, but has a broad development prospect, and a considerable number of mainland investors have already started to seek digital asset trading. provide other digital assets trading. It will be a boon to mainland investors if BC Technology can reach a cooperation with the mainland.

Regarding the cooperation, Steve, a group executive, said, “China has a very promising future and we are particularly keen to cooperate with the Chinese mainland in digital assets.”

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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