Wirecard's Fraud Allegations and the Crypto Market

June 30, 2020 10:35 AM
Wirecard’s alleged fraud and insolvency has had an impact on crypto
Counterparty risk is a key consideration in both the crypto and fiat worlds
Crypto and Bitcoin Market Cap Story of Day

Crypto and Bitcoin Market Cap Story of Day





Crypto volatility continues to decline with June ending as one of the slowest months of 2020. Spot volumes about 50% a declining 30-day average.


Wirecard’s alleged fraud and insolvency has had some unexpected knock-on effects to crypto. We give an overview of the debacle and discuss the implications for the space.

Wirecard bank, a German-based payment processor for primarily niche industries, was once known as arguably the most promising German technology startup. In fact, the company ultimately replaced Commerzbank in the DAX 30 in what was seen at the time as a symbolic changing of the guard. Over the last weeks, however, it was made apparent that year-long accusations around fraudulent activities at the firm's Singapore branch held water. According to reports, the company had over €1.9 billion missing from its balance sheet and about half of the supposed payments it has ever processed are in question. The company filed for bankruptcy but has stated it intends to maintain operations while going through the process. 

Crypto was one of the many “niche” industries that Wirecard had supported through its growth. Of note, crypto.com has already announced they are returning crypto funds to their owners as Wirecard had acted as issuers of their debit card. It is unclear if there are other crypto funds, exchanges, or OTC desks that will be caught up in the bankruptcy through the firm's subsidiary Wirecard Bank. That said, while being painful for any counterparty caught in the mix, we believe the impact on the overall crypto sphere will be modest. There are plenty of alternative specialist banks and even major money centers (including JP Morgan) which have entered the space in various capacities. The episode serves as a strong reminder that counterparty risk is a key consideration in both the crypto and fiat worlds.


About the Author

FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets. You can subscribe to FRNT Financial Morning Note at https://www.frnt.io/morningnote