NEW YORK (Reuters) - Coinsetter, a New York-based bitcoin exchange that targets institutional and professional traders, said on Wednesday it has acquired Canadian Virtual Exchange, a bitcoin trading platform which recently shut down due to security breaches.
According to sources, the deal was valued at $2 million, marking the first merger deal in the growing bitcoin exchange market.
Jaron Lukasiewicz, chief executive officer of Coinsetter, will become the CEO of Cavirtex. The transaction was an all-stock deal, Lukasiewicz told Reuters, although he declined to give the total value.
Bitcoin is a virtual currency created through a "mining" process where a computer's resources are used to perform millions of calculations. It has been hailed as revolutionary by the currency's advocates because of its lack of ties to a central bank and its potential as an alternative to credit cards to pay for goods and services.
Lukasiewicz said Coinsetter chief technology officer Marshall Swatt reached out to Cavirtex "just kind of on a hunch and it evolved form there."
Cavirtex shut down in March following a breach that compromised security information including password hashes. Lukasiewicz said the exchange would resume operation later on Wednesday.
"We saw a lot of assets in Cavirtex not only in terms of entering the Canadian market, but being a leader in it," he said. "But probably the most important asset was the exchange's compliance-approved domestic bank account in Canada."
He said banking relationships had become difficult to obtain for bitcoin companies and "bitcoin exchanges have become the connecting point between the traditional banking institutions and the bitcoin ecosystem."
Coinsetter has an average daily volume of 1,200 bitcoins, or just over $290,000.
"(We) will create a ... Canadian bitcoin exchange with low latency trade execution, margin trading and growing interaction with customers through our Toronto office," said Swatt.
In midday trading, bitcoin was down 3.5 percent at $244.84 BTC=BRSP.
Reporting by Gertrude Chavez-Dreyfuss; Editing by Ted Botha