Circle, a Boston-based payments startup, has acquired Poloniex, a top-20 US cryptocurrency exchange.
The deal was first reported earlier this month by the blockchain news blog Modern Consensus, but not announced by the companies until now. Fortune reports that the price tag was $400 million.
Circle Pay, Circle Trade, Circle Invest
Circle’s best-known product is a mobile payments app, Circle Pay. But it also operates CircleTrade, a quiet, over-the-counter cryptocurrency trading platform for big-fish investors (minimum order: $250,000). And it’s planning to launch Circle Invest, which will be “focused on the investing behavior around digital assets—not just bitcoin, but the top digital assets in the market,” says Circle CEO Jeremy Allaire. Circle Invest is where the Poloniex acquisition comes in; Circle will use the exchange to boost its own crypto investing services.
That’s three different platforms that Circle will soon offer; Allaire calls it a “family of products.”
Each product is going up against different fintech companies that, for now, are more established, better-known brands than Circle. Asked to list Circle’s competitors, Allaire responds: “I’d say in the social payments space, it’s companies like Square Cash or Venmo. In cross-currency payments, which we enable people to do instantly for free, it might be a company like TransferWise. Circle Invest, which is not yet launched, will compete certainly with products like Coinbase.com, or Robinhood’s latest crypto offering.”
All of those companies are different, and not all of them touch cryptocurrency, but all of them are converging in the red-hot mobile payments space.
Square recently added a bitcoin-buying feature to its Square Cash app; Venmo is owned by PayPal, does not currently have cryptocurrency operability, and is only in the US; TransferWise allows users to send money to someone in another country (but not within the same country); Coinbase is the leading cryptocurrency brokerage in the US; and Robinhood, a mobile stock-trading app, recently added bitcoin and ethereum to its app.
Is Circle a bitcoin company?
Circle, which has raised $136 million from investors including Goldman Sachs, has had an interesting, sometimes contradictory path in terms of its public messaging.
When Circle first launched its mobile, peer-to-peer payments app in 2015, the app only supported bitcoin; customers could buy and sell bitcoin and send bitcoin to friends as payment. For that reason, Circle was almost universally seen as a bitcoin company, mentioned in the same context as Coinbase and a few other early, well-funded bitcoin startups. In 2015, Circle was the very first company to obtain a BitLicense, the regulatory stamp of approval from the New York Department of Financial Services issued to cryptocurrency companies that hold customers’ funds.
But in 2016, Circle Pay ended its support of bitcoin as a currency, though it continues to use the bitcoin blockchain as a settlement rail on the back end.
In a 2016 interview with Yahoo Finance, Allaire explained that Circle began in bitcoin only because it was “an easy way to get our operations humming,” and that Circle never intended to be a cryptocurrency company.
“We needed to go get licenses for every state and get licenses from Europe and the UK, and we were waiting on those, and we said, ‘We’re not going to sit around for two years and not ship anything,’” Allaire said. “So we decided to ship a product that only supported bitcoin as the currency. But when you went into your account, your holdings were denominated in dollars or in your local currency, and we never positioned it as a way to buy and sell bitcoin. That was not interesting to us.”
When Circle finally got the licenses it needed and launched the product it had always planned, the bitcoin element fell even further into the background of the platform.
But early bitcoin adopter knew the option was there, and publicized it. Even if Circle never saw itself as a bitcoin company per se, that community did. And when Circle stopped allowing customers to use its app to buy and sell bitcoin, Allaire acknowledged at that time, that same community was angry. “In some ways, I know that people who relied on us to buy or sell bitcoin are pissed,” he said. “They’re upset, and they’re crushing us on social media. And in some ways, we’re actually flattered, because they loved that so much. But it’s not the focus of what we want to do.”
Now, two years after moving away from bitcoin to a certain extent, Circle has bought a bitcoin exchange. So, is Circle a cryptocurrency company or not?
Allaire has broader ambitions: a multi-product financial services company that uses and believes in blockchain, and offers crypto investing, but also has a peer-to-peer social payments app on which you could send friends money without ever thinking about or touching bitcoin.
“We really see financial infrastructure that supports the next generation of the internet economy,” he says, “being built on cryptographic tokens and blockchain-based settlement and record-keeping systems.”
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Daniel Roberts covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite.
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