Canaan

Crypto Biz: UAE’s regulatory structure draws crypto firms, Canaan’s revenue slumps, and more

The United Arab Emirates increasingly attracts Web3 companies to its jurisdictions, becoming the center of global crypto innovation.

Behind the wave of companies moving or deploying initiatives in the UAE is regulation. The country has introduced regulatory frameworks for decentralized autonomous organizations (DAOs), virtual asset providers, metaverses and other Web3-related entities.

By offering regulatory clarity and a clear path to compliance — amid a crackdown in the United States — the UAE is moving closer to fulfilling what it wants to be: an international financial hub for digital assets.

While predictions about how it will affect the future of the UAE or the crypto space itself vary, history shows how countries have used regulatory gaps to build new industries or curb existing ones.

This week’s Crypto Biz also explores Canaan’s revenue challenges, Wormhole’s massive fundraising and Banco Santander’s crypto moves.

Iota launches $100 million Abu Dhabi foundation for Middle East expansion

Open-source blockchain developer Iota announced the launch of the Iota Ecosystem DLT Foundation in Abu Dhabi, which is dedicated to expanding its distributed ledger technology (DLT) in the Middle East.

Bitcoin ASIC manufacturer Canaan saw 82% revenue drop in Q4

The firm’s revenue only fell by 14% for the entire year as part of better industry conditions in Q1 and Q2 2022.

According to a new filing with the United States Securities and Exchange Commission on March 7, Canaan, a Chinese Bitcoin (BTC) miner and manufacturer of application-specific integrated circuit (ASIC) mining machines, reported that its revenue decreased by 82.1% year-over-year to $56.8 million in Q4 2022. During the quarter, Canaan sold 1.9 million terahashes per second worth of computing power for Bitcoin mining, not accounting for lower ASIC prices, representing a 75.8% decline from Q4 2021.

At the same time, Canaan’s mining revenue improved 368.2% year-over-year to $10.46 million. As told by Nangeng Zhang, chairman and CEO of Canaan:

“To mitigate demand risks during the market downturn, we have been diligently improving and developing our mining business. Our efforts yielded more progress in early 2023 with 3.8 EH/s hash rate installed for mining as of the end of February. Accordingly, we have made decisive investments in bolstering our production capacity and expanding our mining operations to more varied geographic regions that offer advantageous conditions.”

Despite the segment’s success, however, Canaan’s net income swung to a $63.6-million loss in Q4 2022 compared to a profit of $182.0 million in Q4 2021. As told by Jin Cheng, chief financial officer of Canaan, the loss was due to inventory write-downs and research expenses related to its new fleet of ASICs:

“Considering very soft market demand and low selling price, we incurred an additional inventory write-down of RMB205.3 million, which also dampened our gross margin. In conjunction with one-time higher research and development expenses relating to the tape-out for our A13 series, our bottom line suffered losses during the quarter.”

For the full year, the firm’s revenue decreased by 13.8% to $634.9 million, mainly due to better industry conditions in Q1 and Q2 2022. The firm currently has $706 million in total assets compared to $67 million in total liabilities.

Canaan expects minor revenue drop in 2022 despite crypto mining crisis

Crypto mining firm Canaan expects its annual RMB-denominated revenue to drop less than 15% despite the crypto market cap plummeting 70% this year.

Cryptocurrency mining giant Canaan continues to generate significant revenues from crypto operations despite the ongoing crypto mining crisis.

Canaan’s total revenue for the first nine months of 2022 was roughly 4 billion Chinese yuan (RMB), or about $573 million, a spokesperson for Canaan told Cointelegraph. As the firm expects to generate another 310 million RMB ($46 million) in Q4, the total annual revenues is expected to amount to 4.3 billion RMB ($619 million).

The amount is down around 14% from Canaan’s RMB-denominated revenue of 4.9 billion RMB last year. In USD, the total revenues were down about 21% from $783 million in 2021.

Despite the dip, Canaan’s 2022 annual revenue will still be significantly bigger than it was a few years ago, having surged nearly 90% from 448 million RMB ($64 million) in 2020. In 2019, Canaan’s annual revenue amounted to 1.4 billion RMB ($201 million).

*Canaan’s breakdown of revenue by services. Source: SEC report*

Canaan’s financial success over the past few years comes after the company expanded its services beyond manufacturing crypto-mining devices with the launch of its own mining operations.

“We started our mining operations in mid-2021. One of our considerations is that when there is a shortage of mining machine demand, we can deploy some of our inventory into our mining operations to earn extra income,” Canaan said. Under certain circumstances, Canaan is able to resell their mining equipment, the firm’s representative stated:

“We balance our machine usage through mining, and our mining operation serves as a powerful support and supplement to mining machine sales.”

The spokesperson declined to disclose more details about the usage and reselling of used mining equipment.

The news comes amid the crypto mining industry suffering a major crisis, with 100% of public mining companies having to sell almost all crypto they mined in 2022.

On Dec. 28, crypto mining firm Argo Blockchain sold flagship mining facility Helios to Galaxy Digital in order to reduce its debt and improve liquidity. Crypto mining firm Core Scientific also filed for Chapter 11 bankruptcy on Dec. 21 as a result of rising energy costs.

Bitcoin miner Canaan scales operations despite low earnings, CEO says

Chinese Bitcoin mining firm Canaan posted a 90% over-the-quarter decrease in net income in Q3 2022, but it’s not the end of its business.

Chinese cryptocurrency mining firm Canaan will continue to expand operations despite the ongoing bear market and an associated drop in earnings, according to the company’s CEO.

Canaan posted a 90% over-the-quarter decrease in net income in Q3 2022, the firm officially announced on Nov. 14. The firm’s Q3 net income amounted to 61.1 million renminbi (RMB), or $8.6 million, which is a 88% decrease from the same period in 2021, Canaan noted.

The company’s revenues dropped about 41% from 1.7 million RMB ($230,000) in Q2 2022, while gross profit plummeted 75% from 940 million RMB ($130 million) posted in the previous quarter.

Amid Bitcoin (BTC) mining becoming less profitable due to the crypto winter, Canaan’s mining devices have also experienced a significant decline in demand. According to the latest financials, Canaan sold a total 3.5 million terahashes per second (Th/s) of computing power in Q3, or 37% less than in the previous quarter.

Despite a downward trend in its latest financial report, Canaan does not plan to slow down the company’s growth. On the contrary, Canaan continues to scale its operations across the world, including research and development projects as well as mining operations, CEO Nangeng Zhang said.

“As part of our ongoing effort to strengthen our research and development capabilities, we are expanding our Singapore headquarters with promising local research and development talents to help support our business on a global scale,” Zhang noted.

He also mentioned that Canaan has been expanding its mining business in the United States this year, adding:

“We face a very tough industry period as the Bitcoin price is sinking to lows the market has not seen in two years. Our priority is to conserve our cash, minimize our expenses, and endure this market downturn.”

Apart from scaling worldwide, Canaan has been working on new mining solutions this year. In October, Canaan officially released its new mining device series, AvalonMade 13. The new series is based on the advanced application-specific integrated circuit technology, including two models featuring 110 Th/s and 130 Th/s hash rates.

Canaan did not immediately respond to Cointelegraph’s request for comment.

“The launch of the new generation product reaffirms our confidence in the fundamental value of the Bitcoin ecosystem and reflects our constant efforts in the research and development of supercomputing technology,” Zhang stated.

As previously reported by Cointelegraph, Canaan posted a 117% increase in gross profit in Q2 2022 over the same period in 2021. The company still expected a deterioration in financials due to the ongoing bear market.