The directors present the strategic report for the year ended 31 December 2024.
Crypto Facilities Ltd, (the “Company”) is a wholly owned subsidiary of Crypto Research Ltd (The “Parent”), a company registered in England and Wales. The Company operates a platform which allows participants to trade in Futures based on the price of cryptocurrency. The Company has one core regulated business, enabling customers to trade in digital asset Futures on its Multilateral Trading Facility (MTF).
The Company derives revenue from trading fees charged to participants for the matched transactions of the notional value of derivatives contracts traded on its exchange platform.
The company operates within the highly dynamic and rapidly changing cryptocurrency market, where fluctuations in digital asset values, regulatory updates, and technological advancements can significantly impact operations. Despite these challenges, management has identified several key factors that support the company’s ability to remain a going concern.
Additionally, management has assessed the primary risks facing the company, including market decline and regulatory changes, which can lead to fluctuations in revenue. Many of these factors are unpredictable and beyond the company’s control. However, management anticipates continued market volatility and expects gradual improvement in the cryptocurrency market throughout 2025 and beyond.
As of 31 December 2024, the Company had £16.0 million of cash on hand (2023: £7.6 million).
Personnel and third-party fraud risk
Digital Assets and cryptocurrencies are supported by digital networks, operated through protocols established and governed by consensus that are implemented through computer software. They are therefore exposed to risks due to fraud, technological glitches, malware, and hackers. The loss of access to its private keys or other data loss could adversely impact the company’s reputation, business, financial condition, and operations. The company employs strict measures and controls in ensuring that customer data and assets are safeguarded. Furthermore, the company has on-going mechanisms to monitor platform activity and reconciliation of transactions against platform data.
Market risk
The primary activity of the company is the provision of a trading platform that allows its users to transact in cryptocurrency derivative contracts. The company generates trading revenues through the charging of fees to the clients of the platform each time they execute a transaction, and these fees are in the form of cryptocurrency. The company’s trading revenues are therefore subject to significant cryptocurrency market risk.
Liquidity risk
The company is unlikely to face liquidity risks in the short to medium term. The firm maintains substantial liquid cash reserves that exceed its typical annual cash outflows. Cash balances at the end of 2024 were £16 million, and this is expected to grow to £37 million by the end of 2025. We anticipate maintaining cash reserves well above the minimum capital adequacy requirements and annual cash outflows. As a result, the company does not rely on the liquidation of illiquid assets to meet its liabilities.
Credit risk
The company is not subject to any significant credit risks. The company does not extend credit to any of the clients on its trading platform and does not intend to change this aspect of its business model. The company has no plans to extend into lines of business that would alter its credit risk profile. Trade debtors comprise a minimal proportion of its balance sheet and this is not forecast to change in a significant manner.
For the year ended 31 December 2024, the Company key performance indicators (“KPI”) include but are not limited to trading volume and revenue. These metrics provide indicators as to the performance of the Company and its ability to retain and grow its client base.
Trading revenue decreased by 48% (£703k to £367k) and total income increased by 145% (£7.8m to £19.2m). The decrease in trading revenue is attributed to the industry market condition and the board of directors anticipates a strong rebound in 2025 buoyed by increased institutional participation in crypto assets and launches of additional Futures product.
Future Developments
The Company continues to enhance its trading platform to attract and retain customers.
Key elements of the company’s strategy include but are not limited to the following:
Continuous enhancement of the trading platform
Customer retention and growth
Providing customers with the option to trade on the platform by depositing legal tender
In accordance with Section 414CZA, the directors have considered the following matters during the performance of their duty to promote the success of the Company.
The board's current decisions are aligned with the future aims of the Company, which are primarily orientated towards growth and continuously improving the services provided to the Company's clients.
Stakeholder Engagement
The Company manages its engagements with its key stakeholders in the following ways:
Clients
The Company's clients are the users of its trading platform, and the board is focused on delivering a high-quality user experience. This is achieved through collecting client feedback and monitoring the wider industry to inform decisions about adding new features and other improvements to the platform. Client engagement is achieved through community building, direct client outreach and building meaningful relationships with individual clients. In respect of the Company's target market, the Company's long-term plans are to expand its institutional investors member base since it now operates a Multilateral Trading Facility (MTF), as well as ensuring that individual investors can access the Company's services through user-friendly and trusted channels.
Suppliers
The Company's key supplier is the provider of settlement and valuation pricing for the contracts listed on the trading platform, facilitating an integral part of the Company's operations. This relationship is managed through a licensing agreement between the parties. The quality and reliability of this service is of key operational and reputational importance to the Company and constitutes an essential part of the long-term ambitions of the Company. The Company also relies on providers of cloud computing services, and the board is vigilant to the evolving landscape of providers and services available to ensure that it is utilizing those that best fit its needs.
Employees
The directors recognise that the Company's employees are crucial to the business and the delivery of the future strategic aims. The success of the business depends on attracting, retaining and motivating highly qualified employees. The directors understand the importance of pay, benefits, safety and the workplace environment in achieving this objective. Management directly engage with all employees on a bi-annual basis through formal conversations, and monthly through business updates. Directors consider the implications of decisions on employees and the wider workforce, where relevant and feasible.
Capital allocation
In the year 2024, the board did not recommend dividend payout.
Culture
In its business conduct, the Company emphasizes transparency and high compliance standards in order to comply with the requirements and rules imposed by its regulators, predominantly the Financial Conduct Authority. The Company continues to be ambitious in its strategic aims, seeking to maintain a trusted reputation in the market while continuously expanding the scope and quality of the services it offers its clients. The Company also focuses on technological innovation, allowing it to bring new and innovative products to market while ensuring that these meet the high standards the Company is committed to.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2024.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
M Jennings (Resigned on 29 November 2024)
C Dolan (Resigned on 11 November 2024)
B Das (Appointed on 25 July 2024)
T Morgan (Appointed on 17 December 2024)
S Kurtas (Appointed on 17 December 2024)
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements of Crypto Facilities Ltd (the 'company') for the year ended 31 December 2024 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
The extent to which our procedures are capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud are: to identify and assess the risks of material misstatement of the financial statements due to fraud, through designing and implementing appropriate responses: and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. Our approach was as follows:
We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and determined that the most significant is the Companies Act 2006.
We understood how the company is complying with those frameworks through discussions with the directors.
We assessed the susceptibility of the company's financial statements to material misstatement including how fraud might occur by considering the key risks impacting the financial statements.
We carried out a review of manual entries recorded in managements accounting records and assessed the appropriateness of such entries.
We have assessed that the company's control environment is adequate for the size and operating model of such a company.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates set out in Note 2 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HMRC, relevant regulators, and the company’s legal advisors.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment by for example forgery, or intentional misrepresentation or through collusion. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing noncompliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's member in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's member those matters we are required to state to the member in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's member, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Crypto Facilities Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 6th Floor, One London Wall, London, EC2Y 5EB.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Crypto Research Ltd as at 31 December 2024. These consolidated financial statements are available from its registered office.
Other operating income relates to residual profit received from the group as part of the group transfer pricing model and is considered to be non-trading income.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
Accounting for cryptocurrencies
The Company values fee revenue on the same day it is earned, the translation performed using the cryptocurrency reference rates calculated and published from group provider, CF Benchmarks, a registered benchmark used by third parties as benchmarks. This ensures that the financial assets are stated at fair value with any resulting gains or losses recognised in the Statement of Comprehensive Income.
Accounting for non-financial crypto assets
Cryptocurrency assets are held for sale in the ordinary course of business of the Company and therefore are accounted for using the principles of FRS 102 Section 13.
FRS 102 Section 13 requires measurement at the lower of cost and net realisable value. The Company has elected to measure the Cryptocurrency assets at fair value.
Cryptocurrency assets are priced on a daily basis based on the amount of the Cryptocurrency assets held using the relevant Quoted Price, and is considered to be the fair value of the Cryptocurrency assets.
Issue and Redemption:
Upon initial recognition and the receipt of Cryptocurrency assets, they are recorded at fair value using the Quoted Price. Upon redemption of Digital Securities and the transfer out of Cryptocurrency assets, the attributable cost shall be calculated in accordance with the average cost methodology, and the overall cost reduced accordingly to represent the de-recognition of the Cryptocurrency assets.
The assets are measured at fair value less costs to sell with changes in valuation being recorded in the Statement of Comprehensive Income in the period in which they arise. Cryptocurrency assets are categorised as non-financial assets.
Subsequent Measurement
Change in the fair value of the Company's own Cryptocurrency assets are recorded through the Statement of Comprehensive Income.
Change in the fair value of client Cryptocurrency assets are attributable to the holders of the the Cryptocurrency assets and therefore the change in value of the Cryptocurrency assets is matched with a corresponding change to Funds owed to clients. There is no impact to the Company's profit or loss in this instance.
Cryptoassets
When a client wishes to transact in cryptocurrency derivatives on the Company trading platform, they must first deposit the relevant cryptocurrency with the Company. These cryptocurrency assets are then held by the Company on behalf of the client. The cumulative balance of cryptocurrencies in other assets, comprises of all client's cryptoassets and the Company owned cryptoassets. Client cryptoassets reflect the balances held by the Company on behalf of its clients. As these assets are the property of its clients, a corresponding entry of the same amount is made in the Company's creditors - funds owed to clients.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2023 - 1).
Following the successful implementation of the Residual Profit Split Method ("RPSM"), the group and many of its operating subsidiaries have adopted this determining transfer pricing on related party transactions. Part of Crypto Facilities Ltd operating income is operated through intercompany revenues from related parties. Those related parties have contractual relationships with clients and earn fees and pay a portion of those fees to Crypto Facilities, determined under the RPSM.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The share scheme is unapproved share scheme granted by parent company, Payward Inc., but treated as as RCA and therefore subjected to PAYE deductions.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
The ordinary shares each carry one voting right and the right to dividends. Ordinary shares have no rights on winding up and are not redeemable.
Profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.