Goldman Sachs-backed start-up Circle announced on Monday the 26th, that the company Is purchasing the famous altcoins and crypto exchange Poloniex for $400 million dollars. In this way, previous rumors about this possibility have now been confirmed. But which are the reason behind this acquisition?
Circle Acquires Poloniex Exchange
Experts in the matter agree that this move performed by Circle is one of the many others to come during this year.
“I think this is a really good sign for the industry. It shows that a lot of companies are going to start consolidating and that will bring out the best talent,” commented Erik Voorhes, CEO of digital asset exchange ShapeShitft. “I think you are going to see a lot of that in 2018. These companies have so much capital at this point.”
At the moment, Circle has different products in the market, as Circle Pay, Circle Trade, and Circle Invest. All of these products and services allow individuals, enterprises, investors and institutions to have access to the cryptocurrency market and liquidity at all times. By acquiring Poloniex, Circle aims to open a “global token marketplace,” an important “key element” of Circle’s product foundation.
Circle’s Operational Plan for Poloniex
In Twitter, a confidential plan about Circle’s intentions buying Poloniex has been circulating. The document explains three important reasons why Circle acquired Poloniex.
Just got this slide from a confidential Circle presentation. It does more to explain Circle's acquisition of Poloniex than anything I have seen today. pic.twitter.com/gRXxDeXvxl
— Nathaniel Popper (@nathanielpopper) February 26, 2018
- Standalone Exchange Business:
Circle plans to operate Poloniex as a standalone business line with a new Circle Holding Company subsidiary.
- SEC Approach:
The intention is to register the new entity with the SEC and the FINRA as a Broker / Dealer and as a licensed ATS. If this turns to be in that way, Circle will be the first company that starts working closely with them. Apparently, the SEC and the FINRA have positively received the request and are ready to work closely with Circle. Furthermore, and very important, the SEC will not pursue any enforcement action for for prior activity.
The SEC has taken a very favorable stance towards Poloniex after Circle’s acquisition. Poloniex is known as a cryptocurrency exchange focused in ICO tokens, compared to other platforms. ICO tokens and some altcoins are considered by the SEC as unregulated securities.
This is why is important to understand the next point.
- The US’s First Regulated Crypto Exchange:
Poloniex will become the first regulated cryptocurrency exchange, allowing Circle to list different crypto tokens, altcoins and tokens that would be deemed as securities. Circle believes that the market will continue to expand and the demand will keep increasing in the future.
Circle may be the next regulated cryptocurrency exchange in the market. It will list different cryptocurrencies including ICO tokens and others considered as securities. At the moment, the SEC has taken a very permissive approach towards this purchase and the parts involved.
Image: Cryptoninjas and SlashGear