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ANALYSIS: Crypto Drafting Trends Are Emerging in M&A Agreements

Feb. 17, 2022, 4:55 PM

The week following “crypto bowl” Sunday is a good time to check in on a drafting trend I’ve had my eye on for a while: the appearance of “crypto” in mergers and acquisitions agreements.

And it’s no coincidence that in the year leading up to the Super Bowl crypto ad debuts last weekend, the number of publicly available agreements containing references to cryptocurrencies and crypto-assets, such as “Bitcoin” and “digital assets,” reached its highest level ever.

Beyond their increased appearance in these agreements, the emerging provisions we’re now seeing may serve as the blueprint for how deal lawyers address crypto in future deals, as the need to do so potentially increases with growing crypto adoption.

As Hannah Miller of Bloomberg News wrote earlier this week, “There’s no more grandiose way for a business to declare it’s entered the mainstream than buying Super Bowl ads.” Applying this line of thought to M&A pari passu: There’s no more prosaic way for deal lawyers to know it’s time to pay attention to crypto than when it starts getting its own reps and MAE carve-outs in publicly filed deal agreements.

Agreements Containing Crypto References

A Bloomberg Law advanced precedent search of publicly available M&A agreements using the Boolean keyword string “crypto” OR “Bitcoin” OR “Ethereum” OR “stablecoin” OR “digital asset” OR “digital currency” yielded 24 unique M&A agreement results signed in 2021 that contain one or more of the quoted terms. (Access precedent search results here.)

While it may seem like a small number of agreements, in the grand scheme, last year’s total is the highest ever for deals involving crypto references—and appears to be new territory for crypto’s presence in the realm of M&A agreements.

Last year was a record year for M&A overall and especially for investment involving entities with a nexus to crypto. The search results—which mostly include transactions involving these entities—illustrate this point.

Among the deals captured by our search were a number of de-SPAC transactions (see below for examples) and some large deals including the $1.2 billion BitGo Holdings Inc–Galaxy Digital Holdings Ltd. merger signed in May and completed in December of last year.

Emerging Crypto Provisions

My review of recent M&A agreements found using the crypto search described above shows the emergence of certain drafting trends. These include some common provisions where crypto references repeatedly appear, as well as a few brand new provisions and carve-outs completely focused on crypto-related matters.

The following are some of the provisions containing crypto references in 2021 deal agreements:

  • “Ownership of Digital Assets” standalone representation and warranty
  • Crypto-focused representation and warranty paragraph added to end of “International Trade; Anti-Corruption” representation and warranty
  • Crypto-specific Material Adverse Effect (MAE) carve-out
  • “Material Contracts” representation and warranty
  • Interim operating covenants exception to allow certain crypto-related transactions
  • Definition of “Cash”
  • Definition of “Indebtedness”
  • Inclusion in description and formula for: calculation of assets at closing, closing consideration, closing working capital
  • Termination provisions
  • Closing statement specifications

Below are some examples of certain provisions listed above that are present in multiple deal agreements reviewed, excerpted from the agreements:

Crypto-Specific MAE Carve-Out, Example 1:

[. . .] (xi) any change in the price or relative value of any digital currency or cryptocurrency, or any other blockchain-based tokens or assets, including Bitcoin or EOS; (xii) any change in existence or legality of any digital currency or cryptocurrency, or any other blockchain-based token or asset, or any halt or suspension in trading of any such digital currency or cryptocurrency on any exchange, in each case including Bitcoin or EOS (except that this clause (xii) shall not exclude any changes in existence, public availability, legality, or trading volume of any digital currency or cryptocurrency, or any other blockchain-based token or asset, or any halt or suspension in trading of any such digital currency or cryptocurrency on any exchange, in each case including Bitcoin or EOS, which, reasonably foreseeably result from actions taken by the Target Companies) [. . .] (SAITECH Ltd.–TradeUP Global Corp. Business Combination Agreement dated Sept. 27, 2021 (governing law: Delaware, Cayman Islands))

Crypto-Specific MAE Carve-Out, Example 2:

[. . .] (c) any change in the price or relative value of any digital currency or cryptocurrency, including but not limited to Bitcoin, (d) any change in trading volume of any digitalcurrency or cryptocurrency, or any halt or suspension in trading of any such digital currency or cryptocurrency on any digital currency exchange, in each case including but not limited to Bitcoin [. . .] (Griid Holdco LLC–Adit EdTech Acquisition Corp. Agreement and Plan of Merger dated Nov. 29, 2021 (governing law: Delaware))

Ownership of Digital Assets Rep:

Ownership of Digital Assets. As of the date of this Agreement, the Target Companies own and have the exclusive ability to control, including by use of “private keys” or other equivalent means or through custody arrangements or other equivalent means, all of the crypto-currencies, blockchain-based tokens, and other blockchain asset equivalents (collectively, “Digital Assets”) set forth on Schedule 4.17(i) of the Company Disclosure Schedules, free and clear of all Liens except for Permitted Liens; provided, however, that such ownership and exclusive ability to control Digital Assets is subject to the continued existence, validity, legality, governance and public availability of the relevant blockchains. Except as set forth on Schedule 4.17(ii) of the Company Disclosure Schedules, the Target Companies and their Predecessors have taken no actions where any of them owns a substantial portion of all outstanding tokens in the then existing issued and circulating supply of such tokens on a blockchain to effectuate change through the governance process of that relevant blockchain that could reasonably foreseeably disrupt the continued existence, validity, legality, governance or public availability of the relevant blockchains. (Bullish Global–Far Peak Acquisition Corp. Business Combination Agreement dated July 8, 2021 (governing law: Delaware, Cayman Islands))

Crypto-Specific Rep Included Under “International Trade; Anti-Corruption”:

In the past five years, no Company Group Member has purchased or sold Bitcoin, or any other digital asset, in a transaction involving a counter-party whose identity was not verified in accordance with the Company’s sanctions compliance policy and any applicable know your customer/anti-money laundering laws or regulations. (Core Scientific Holding Co.–Power & Digital Infrastructure Acquisition Corp. Agreement and Plan of Merger and Reorganization dated July 20, 2021 (governing law: Delaware))

...And You’ve Got to See These as Well

Below are two provisions that I believe are worth noting, despite the fact that they each appeared only in a single agreement during 2021. One is a provision allowing for termination of the agreement if the price of Bitcoin falls below a certain threshold, and the other is a post-closing covenant stipulating that certain compensation payments be converted into Bitcoin.


Termination. This Agreement may be terminated at any time prior to the Effective Time (with respect to Sections 8.01(b) through 8.01(k), by written notice by the terminating party to the other party), whether before or, subject to the terms hereof, after approval of the Merger Partner Voting Proposal by the Shareholders of Merger Partner or approval of the Public Company Voting Proposals by the Shareholders of Public Company:


by Public Company, at any time prior to the Effective Time, if the seven day moving average price of Bitcoin, as reported on Binance as “MA(7)”, falls below $15,000. (Gryphon Digital Mining Inc.–Sphere 3D Corp. Agreement and Plan of Merger dated June 3, 2021 (governing law: Delaware))

Post-Closing Employee Compensation:

Post-Closing Covenants of the Buyer Parties. On the Closing Date, Buyer shall hire the employees, or engage the independent contractors, of Seller set forth in Schedule 6.04. The parties agree that budget for the compensation for the Persons set forth in Schedule 6.04 shall be One Million Three Hundred Four Thousand Dollars ($1,304,000.00) for the twelve (12) month period commencing on the Closing Date. The compensation paid under this Section 6.04 shall be in United States Dollars, but, subject to compliance with Law, converted to bitcoin at the time of payment through the use of a cryptocurrency payment service provider reasonably mutually agreed by Seller and Troika, such as BitPay Send or BitWage. (Redeeem LLC–Troika Media Group Inc. Asset Purchase Agreement dated May 21, 2021 (governing law: New York))

In addition to the examples above, M&A lawyers interested in looking at emerging crypto-related deal provisions might consider reviewing the Delaware-governed BitGo Holdings Inc.–Galaxy Digital Holdings Ltd. Agreement and Plan of Merger, which contains a variety of crypto-specific definitions and terms. For example, it contains a robust definition of “Virtual Currency” and embeds crypto into financial terms like the definition of “Cash” and other consideration-related provisions.

The Future

Looking at how deal parties have begun to address crypto in otherwise standard M&A provisions gives us a sense of how crypto might be included in non-crypto-industry deals in the future.

If the crypto industry continues to grow, more crypto-industry deals will require a sophisticated approach to incorporating crypto holdings in their terms. Assuming the trend toward increasing crypto investment at the corporate level continues, there will likely also be more non-crypto-industry deals in which crypto is among the assets being acquired, creating the need to address the digital currency in their contract terms.

Bloomberg Law subscribers can find related content on our M&A Deal Analytics resource.

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