Circle, a virtual currency startup which is backed by Wall Street firm Goldman Sachs, has purchased Poloniex, a digital token exchange. The move by Circle is aimed at shoring up its position as a leading player in the booming cryptocurrency market. According to Circle on Poloniex the daily trading volumes sometimes exceed $2 billion. About 70 different virtual currencies and tokens are traded on the marketplace. Neither Circle nor Poloniex disclosed the deal’s value.
Among the products developed by Circle is a peer-to-peer payment app that uses blockchain. The startup has also indicated that it will soon be unveiling an app that is retail-focused and which will allow the purchase of virtual currencies. In the OTC bitcoin trading market, Circle is one of the biggest players. Besides Goldman Sachs, Circle is also backed by Chinese online search giant Baidu.
According to the founders of Circle, the acquisition was done with the knowledge of all the investors besides regulators. Among the investors of virtual currencies Poloniex is well-known since there is a wide variety of digital coins available.
The value and number of virtual currencies has increased since the beginning of last year. At the beginning of 2017 the combined value of virtual currencies was about $17 billion per Coinmarketcap, a trade website. Last month their combined value reached $800 billion though this has now fallen to about $450 billion. According to Coinmarketcap, the total number of cryptocurrencies and tokens is now over 1,500.
But even as virtual currencies get popular regulators across the globe have intensified their scrutiny of virtual currency exchanges and ICOs. Last year in July the Securities and Exchange Commission issued a warning to the effect that it could consider some of the tokens being issued in Initial Coin Offerings as securities. This would see them being required to adhere to the laws governing federal securities and assets.
Also being kept under a watchful eyes is the know-your-client and anti-money laundering practices of virtual currency exchanges.
“We intend to continue playing a leadership role when it comes to national and global regulatory frameworks for this space. That includes meeting with the SEC as well as obtaining all relevant licensing,” said the co-founder of Circle, Sean Neville.
In the years to come Circle has indicated that it intends to expand the Poloniex exchange so that besides virtual currency assets, financial products that include derivatives as well as physical goods can be traded on the marketplace.