Startup backed by Goldman Sachs buys Poloniex cryptocurrency exchange
Circle, a startup backed by Goldman Sachs has purchased leading cryptocurrency exchange Poloniex. The aim is to solidify its position as one of the leading cryptocurrency players in the market.
Whilst the exact value of the deal remains confidential, Circle will now control a marketplace, seeing a daily turnover of more than $2 billion in over 70 different currencies and tokens. Fortune magazine has speculated that the deal could be worth around $400million, based on a tip from an insider.
Circle co-founder and CEO, Jeremey Allaire said “We’ve been really impressed with what they have been able to pull off. They defined what originally people thought of as “altcoin” exchanges”. The term altcoin refers to a newer type of cryptocurrency rather than Bitcoin and Ether.
Circle provides a peer-to-peer payment network. In fact, this works via an application which uses the blockchain which is the fundamental technology that underpins Bitcoin. In fact, Circle has become a leader in this crypto technology for the trading of Bitcoins. As a result, Circle is planning to launch a retail application for purchasing cryptocurrencies, called Circle Invest.
Circle is one of the best-funded blockchain startups. In fact, it enjoys investment and support, most particular from Goldman Sachs, and Baidu. On Friday the founders of Circle closed the deal with their investors and regulators.
The value of cryptocurrencies, as well as the number available, has increased rapidly since the start of 2017. The market was worth around $17 billion before peaking at $800 billion in January, and then stabilising at $450 billion today. With over 1500 digital currencies and tokens, available, there is a lot of choice for the shrewd investor.
As an ICO service, Poloniex is famous for being a cryptocurrency exchange. Such services offered include trading on a range of digital coins, issued through ICOs. In recent month ICOs have suffered a crack-down from regulators. Authorities are suggesting that some types of issued coins are to be considered as securities. This means that trading them would have to be compliant with federal securities laws.
“We intend to continue playing a leadership role when it comes to national and global regulatory frameworks for this space”, Co-founder of Circle, Sean Neville said, adding that “this includes meeting with the SEC as well as obtaining all relevant licensing required for us to support our customers.”
In addition, Regulators will pay particular attention to anti-money laundering, (AML), and know-your-customer (KML) practices. This comes after an investigation published by Reuters, that showed Poloniex had allowed some customers to trade in cryptocurrencies. Furthermore, Poloniex had withdrawn around $2000 worth of digital coins after only providing name, email address, and country of residence. This goes against all standard due diligence, know your customer, and anti-money laundering legislation. In fact, Jeremy Allaire, confirmed that Poloniex had now performed a full KYC check for their new customers. However, Mr Allaire was doubtful if these checks included previous clients.
Poloneix is not able to accept customers who reside in New York. This is so since it lacks a state license to operate as a cryptocurrency exchange. Through an investigation by Reuters, had found two Poloniex customers residing in New York. These New Yorkers claimed that they could not trade Poloniex while living in New York, hence they had to reside elsewhere.
“Clearly people get around things like Internet Protocol, (IP) restrictions and other restrictions, and people do it all the time. People evade geo-blocking mechanisms and it’s difficult to fully police. So, it’s possible that some people have snuck through that, and that’s obviously something we take very seriously.” said Allaire.
Circle has also said that over the next couple of years, they aim to grow the Poloniex exchange. It is considering to include various non-crypto assets such as physical goods and financial products including derivatives. Poloniex said in a statement “We look forward to bringing Circle’s experience to increase the scalability and reliability of our platform and operations”.
