In a move that no one saw coming, one of the most popular cryptocurrency exchanges, Poloniex, was acquired by Circle, a Goldman Sachs funded company.
Circle announced on its blog, mentioning that its acquisition of Poloniex will not just help the company grow itself and accomplish its vision further, but will also help it serve its customers with technological advances that it will develop with the new resources that it will now have on its hand.
According to reports, the acquisition was executed for $400 million and will allow Circle full control over Poloniex, which was reported as the first cryptocurrency exchange to reach the ceiling of $1 billion in daily volume.
Where did Circle come from to acquire Poloniex?
With financial backers, the likes of Goldman Sachs and Chinese internet giant Baidu, Circle has had the funding and – with its operations over the years – the influence to be able to acquire an exchange like Poloniex.
Circle, which currently operates as a direct payment transfer company and aims to revolutionize peer-to-peer transfers through mobile devices, also heads Circle Trade, which is an entity that serves cryptocurrency exchanges and investors of large amounts, facilitating transfers between fiat and cryptocurrencies.
At the moment, Circle Trade manages $2 billion regarding transactions per month and also generated over $60 million in quarterly revenue.
The experience gained from these operations combined with the strength that they provided to Circle eventually allowed the company to move ahead with its plans for expansion, and place a bid on Poloniex as a result.
How is the acquisition being seen by the cryptocurrency community?
Considered as one of the leading exchanges in the cryptocurrency industry, Poloniex has been synonymous with cryptocurrency trading. That is the reason why the cryptocurrency community has been taken by surprise of this acquisition, which had not been publicized until the day of its announcement.
While some people see this as an everyday acquisition, the number of such individuals is minimal.
Most of the members of the community perceive the move as Circle trying to make up on lost time where it did not establish itself as a proper cryptocurrency exchange for the everyday user and is now using its capital to try utilizing Poloniex’s established operations to its benefit.
The news of an exchange of Poloniex’s stature being acquired by a company that has funding from Goldman Sachs has caused quite a bit of stir within the community as well.
Some members stated that Goldman Sachs might be trying to see if a company that is funded by it could make substantial progress in the cryptocurrency market, which would allow the financial institution to decide whether or not to directly intercept the cryptocurrency industry with operations of its name and brand.
Whereas, a select few go more in-depth to speculate and do not hesitate to mention that Goldman Sachs might be more involved in this particular operation than just having participated in Circle’s funding round a while ago.
However, since no official announcement has been made by Goldman Sachs itself, for now, the acquisition made by Circle remains as a tech company – that also happens to have been funded by a Wall Street giant – investing further in the cryptocurrency space to establish itself and its brand for expansion.
What this means from a regulatory standpoint
Nathaniel Popper had an interesting line of inquiry on Twitter. The SEC did remark that many ICO’s can be classified as securities, now, if they truly are considered as securities at the present moment, that means that many of these tokens are breaking the law, because most of these tokens have not gone through the registration process and has not received any approval by the SEC to trade. Furthermore, brokers or dealers that are facilitating the trade of these tokens like Poloniex are also breaking the law.
Nathaniel stated:
“The SEC has said that most ICO tokens are unregistered securities and also suggested that exchanges, such as Poloniex, that trade those tokens, are likely breaking the law against trading unregistered securities. I had assumed that some sort of crackdown was coming.”
He also noted that according to documents that he’s seen, it does seem like regulators have given an “informal nod” to Circle, stating that they wouldn’t pursue Circle for any past misdeeds that may have been committed by Poloniex.
He commented further via Twitter:
” Nathaniel Popper @nathanielpopper
The SEC seems to be saying here that it’s okay if you broke the rules, as long as you get acquired by a legitimate player before we crack down on you.The question now seems to be whether the SEC will apply this same thinking to other virtual currency exchanges if they are acquired by large players.”
This aspect of regulatory clarity has been something that has been a pressing concern in the space, will it be the case that many of these current stand-alone exchanges will be finding acquirers to avoid potential issues and be under the secure regulatory umbrella of their acquirers?
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