Melbourne-based Blockchain Global has entered into a binding agreement with Australian Securities Exchange (ASX)-listed Digital X to onboard all customers from its liquidity desk, Digital X Direct, onto its own bitcoin exchange platform, ACX.io.
According to Blockchain Global CEO Sam Lee, ACX.io is Australia's largest bitcoin exchange by volume and order book, claiming 60 percent of the bitcoin market trade volume in the country.
The agreement will see Blockchain Global take over the management of Digital X Direct's clients, and Digital X will receive 50 percent of the revenue over a five-year term from new customers introduced to the ACX.io exchange as a result.
"We wanted to ensure that the liquidity of the bitcoins we mine existed in Australia," Lee explained.
Digital X's role will centre on customer introduction, sharing of compliance procedures, and recommendation around technology best practices and service providers, while Blockchain Global will be responsible for compliance, banking, trading software, and custodianship of customer funds and personal information.
"We see immense synergies working with the Digital X team to expand on the success of Digital X Direct and ACX.io platforms," Lee said. "In addition to providing additional liquidity for our bitcoin mining operations, the knowledge gained from this agreement will also greatly benefit our corporate accelerator program and management consulting division."
The companies signed a cooperation agreement back in 2015 that saw the exchanging of industry-specific information.
Blockchain Global was founded in 2014, but was operating previously as Bitcoin Group. It rebranded after the company expanded operations beyond being simply a bitcoin mining operator, now comprising a management consulting division and a corporate incubator -- which ACX.io was born out of.
In January last year, Bitcoin Group closed its initial public offering (IPO) after raising AU$5.9 million to secure its spot as the world's first publicly floated bitcoin mining firm.
However, in March, Bitcoin Group had to scrap its ASX plans after a listing rule prevented the company from adhering to the regulatory requirements.
Bitcoin Group's independent accounting firm was required to factor in the reduction of newly minted bitcoins caused by so-called 'block halving' in July 2016, without regard to the expected increase in bitcoin price. According to Bitcoin Group, the last time block halving occurred in 2012, the bitcoin price soared in the following six months.
The corporate regulator prohibited any forecasting on the bitcoin price, meaning the working capital report was unable to allow for any increase in the cryptocurrency's price once the number of bitcoins available to be mined halved in July.
"It is unfortunate that regulators have not yet got close around how to best allow blockchain technology -- and bitcoins for that matter -- to move forward in Australia," Lee said on Thursday. "But we respect that decision and therefore have since proven our business model by achieving two consecutive years of profits for the 2015 and 2016 financial years."
The company said its activities generated AU$1.9 million and AU$5.9 million revenue in FY15 and FY16 respectively.
Digital X found itself listed on the ASX after performing a reverse takeover of investment firm Macro Energy almost three years ago. Digital X only emerged in October 2015 after DigitalBTC -- trading as Digital CC -- underwent a name change and shift in business model as well.
After rebranding, Digital X announced its focus would be on its app-based cash remittance product AirPocket, saying at the time that the new name and direction represented a strategic change from a focus on bitcoin as a mechanism in order to store value to a focus on software development.
For the first half of the 2017 financial year, Digital X posted an operating loss of $1.06 million, taking a $591,000 hit in the second quarter.
$8.4 million was spent on the purchase of bitcoins for the organisation's liquidity desk, while the hosting of bitcoin mining equipment also set Digital X back $240,000 for the six-month period.
Handing its liquidity desk duties over to Blockchain Group will allow Digital X to focus on AirPocket, the company said.