VERSABANK TRANSFERS DIGITAL DEPOSIT RECEIPT ASSETS AND OTHER RESOURCES TO WHOLLY OWNED SUBSIDIARY FOCUSED EXCLUSIVELY ON DIGITAL ASSET OPPORTUNITY

Rhea-AI Summary

VersaBank (TSX: VBNK) (NASDAQ: VBNK) has announced the transfer of its Digital Deposit Receipt (DDR) technology assets and resources to a wholly owned subsidiary, renamed Digital Meteor, Inc. This strategic move supports the planned divestiture of the company's Cyber Security businesses and aims to capitalize on digital asset opportunities.

The company's DDR technology, which has completed pilot programs on Algorand, Ethereum, and Stellar blockchains, provides secure representation of federally regulated bank deposits and can be converted to and from digital currencies like Bitcoin. The technology received SOC 2 Type I certification for its VersaVault® technology in 2022.

The transfer aligns with recent U.S. government initiatives supporting digital assets, including President Trump's executive order to promote U.S. leadership in digital assets and the SEC's creation of a digital currency task force. The company reports no material financial implications from this transfer.

Positive

• Successfully completed pilot programs for DDR technology on multiple blockchain platforms
• Obtained SOC 2 Type I certification for VersaVault® technology
• Strategic positioning to capitalize on growing digital asset opportunities
• Potential for DDR technology to provide ultra-low-cost deposit funding

Negative

• None.

Insights

Financial Technology Analyst

This corporate restructuring marks a strategic pivot that could significantly enhance VersaBank's market position in the digital asset space. The creation of Digital Meteor, Inc. as a dedicated subsidiary for DDR technology demonstrates a clear focus on monetizing their blockchain innovations while preparing for the divestiture of their cybersecurity operations.

The timing is particularly strategic given the evolving regulatory landscape. The recent executive order and SEC task force creation signal a potential acceleration in institutional adoption of digital assets, creating a substantial market opportunity. VersaBank's DDR technology, with its multi-blockchain compatibility (Algorand, Ethereum and Stellar) and SOC 2 Type I certification, positions them as a trusted bridge between traditional banking and digital assets.

Three key competitive advantages stand out:

• Their status as a regulated bank offering digital asset solutions, which provides built-in regulatory compliance and trust
• The potential for ultra-low-cost deposit funding through DDRs, which could significantly impact their cost of capital
• The technical capability to seamlessly convert between DDRs and cryptocurrencies like Bitcoin, addressing a critical market need

The transfer has no immediate material financial implications, but the long-term potential is substantial. As traditional financial institutions seek compliant ways to enter the digital asset space, VersaBank's technology could become an attractive licensing opportunity or partnership platform. The separation of this technology into a dedicated subsidiary also creates optionality for future strategic transactions, whether through partnerships, licensing agreements, or potential spin-off opportunities.

- Corporate Realignment Supports Planned Divestiture of Cyber Security Businesses -

LONDON, ON, Jan. 27, 2025 /PRNewswire/ - VersaBank (TSX: VBNK) (NASDAQ: VBNK), a North American leader in business-to-business digital banking, as well as technology solutions for cybersecurity, today announced the internal transfer of certain assets, including intellectual property, and other resources, including personnel, related to its revolutionary Digital Deposit Receipt technology ("DDR") to an existing, wholly owned subsidiary of DRT Cyber Inc. ("DRTC") (the "Transfer"). The subsidiary, which will exclusively hold DDR assets and resources, has been renamed Digital Meteor, Inc., and is expected to enable VersaBank to generate additional shareholder value by capitalizing on its proven, proprietary digital asset technology and intellectual property, alongside its strong anticipated growth from ramping up its Receivable Purchase Program ("RPP") in the U.S. The Transfer also supports the Bank's planned divestiture of its Cyber Security businesses. There are no material financial implications associated with the Transfer.

"We continue to be encouraged by the favorable stance of President Donald Trump and the new administration with respect to digital assets and the role they can play in the future of banking and commerce, not only in the United States but around the world," said David Taylor, President and Chief Executive Officer, VersaBank. "We are especially encouraged by President Trump's executive order on January 23 to "promote United States leadership in digital assets and financial technology", which includes establishing a working group to "advise on digital asset policy and work with Congress on digital asset legislation, as well as the SEC's creation of a digital currency task force last week. VersaBank is proud to be at the forefront of this revolution as leaders in digital asset innovation. We are the first bank to our knowledge to have successfully completed a pilot program with our blockchain-based DDR, providing a secure representation of federally regulated bank deposits, on the Algorand, Ethereum and Stellar blockchains, and received SOC 2 Type I certification for the underlying VersaVault^® technology in 2022. Importantly, our DDRs can be seamlessly converted to and from other digital currencies such as Bitcoin."

"With renewed optimism about the future of digital assets in the United States and our further expansion into the U.S. financial services market, we are observing increasing third party interest in our proprietary DDR technology. This technology combines the safety of traditional banking with the efficiency, cost savings, security, and flexibility of blockchain technology. Additionally, it addresses the need for properly regulated custody of digital assets with secure platforms such as VersaVault^®. Licensed banks are the trusted, regulated safekeepers of personal and business cash assets and other valuables and are naturally positioned to do the same for digital currencies. We believe our trusted and secure solutions, along with the potential for DDRs to be an ultra-low-cost source of deposit funding, will play a meaningful role in enabling U.S. banks and other entities to confidently engage in the rapidly developing field of digital commerce."

About VersaBank's Digital Deposit Receipts (DDRs)

VersaBank's DDRs are highly encrypted digital assets, that represent an actual fiat currency on deposit with the Bank. Issued on secure blockchains such as Algorand, Ethereum, and Stellar, DDRs offer superior security, stability, and regulatory compliance compared to traditional stablecoins. As a SOC2 compliant digital asset with a continuously known value, DDRs provide a trusted alternative for mainstream financial applications.

About VersaBank

VersaBank is a North American bank (federally chartered in Canada and the U.S.) with a difference. VersaBank was the world's first fully digital financial institutional and today has a cloud-based, branchless, business-to-business model based on its proprietary state-of-the-art technology that enables it to profitably address underserved segments of the banking industry in a significantly risk mitigated manner. Because VersaBank obtains its deposits and provides financing electronically through financial intermediary partners, it benefits from significant operating leverage that drives efficiency and return on common equity. In August 2024, VersaBank launched its unique Receivable Purchase Program (RPP) funding solution, which has been highly successful in Canada for nearly 15 years, to the underserved multi-trillion-dollar U.S. market. Based on the Bank's proprietary technology, the Bank's RPP provides funding for very low-risk point-of-sale finance companies through the automated electronic purchase of cash flow streams derived from the finance partner's loans.

VersaBank also owns Washington, DC-based DRT Cyber Inc., a North America leader in the provision of cyber security services to address the rapidly growing volume of cyber threats challenging financial institutions, multi-national corporations and government entities.

VersaBank's Common Shares trade on the Toronto Stock Exchange ("TSX") and Nasdaq under the symbol VBNK. 

Visit our website at:  www.versabank.com
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SOURCE VersaBank

FAQ

What is the purpose of VersaBank's DDR technology transfer to Digital Meteor, Inc?

The transfer aims to capitalize on digital asset opportunities and supports the planned divestiture of Cyber Security businesses while enabling VersaBank to generate additional shareholder value.

Which blockchain platforms has VersaBank's DDR technology been tested on?

VersaBank's DDR technology has successfully completed pilot programs on Algorand, Ethereum, and Stellar blockchains.

What certifications has VBNK's DDR technology received?

VersaBank's VersaVault® technology, which underlies the DDR system, received SOC 2 Type I certification in 2022.

How does VersaBank's DDR technology interact with other digital currencies?

The DDR technology allows for seamless conversion to and from other digital currencies such as Bitcoin while providing secure representation of federally regulated bank deposits.

What are the financial implications of VBNK's DDR technology transfer?

According to the announcement, there are no material financial implications associated with the transfer of DDR technology assets to Digital Meteor, Inc.