Modern Consensus has learned that Circle, the venture-rich mobile pay startup that competes with Venmo and makes sending money almost effortless, is deep in discussions to acquire Poloniex, the American cryptocurrency exchange that made its name by listing scores of altcoins on a platform that resembles a professional trading station. At press time, Modern Consensus was unable to confirm the terms of the deal.
According to one highly placed source with knowledge of the discussions, “Circle and Poloniex agreed to terms and Circle has already approached the regulators. The regulators came back with a list of KYC demands [Know Your Customer] and Circle has agreed to meet all the conditions.”
Poloniex is known to already feature some very stringent KYC requirements its customers must meet. For example, after initially allowing several accounts to be opened by a single user, the company now permits only one account per verified user. It sets limits on daily withdrawals similar to those found at other exchanges. It has also been plagued by the same customer support and verification backlogs that are bedeviling its rivals, often taking weeks to bump users up to the next level of verification status.
Poloniex did not respond to a request for comment on the pending transaction; Circle replied to multiple requests with only a form letter. This story will be updated with further comment if either responds.
At first blush, the matchup is at least somewhat surprising. Circle, which got its start as a quick and safe way to turn bitcoin into U.S.dollars, has been known for its mono focus on BTC. That’s the opposite of Poloniex, which lists a mind-boggling 68 different tokens. Where the Circle interface is all about customer ease of use, Poloniex looks much more like a Bloomberg Terminal, and features complex innovations like margin trading and lending, which aren’t offered by more beginner-friendly sites like Coinbase.
But there are similarities between Circle and Poloniex, as well. For one thing, both companies are U.S. based, which makes integration much easier.
Poloniex has done an effective job of informing its users of possibly troubling issues, which is critical for an exchange known for listing so many obscure coins. They are quick to expel tokens that run into problems, and a tweet like this one on November 7, 2017, notifying followers that SJCX, NOTE, and NAUT would be delisted provides everyone with fair warning about their assets.
Poloniex has also been known to have a somewhat combative tone to its communications, which is also a departure from the super-friendly interface of Circle. Last June, for example, Stellar was doing one of its periodic giveaways of its token STR. Stellar listed Poloniex on its site as participants in the giveaway. The Poloniex twitter feed lit up with a strongly worded denial that read “This was done without our consent. We did not agree to participate nor do we possess the STR for this giveaway.” Because Poloniex had participated in a similar Stellar giveaway in 2016 many investors were left to wonder about a possible break between the token and the exchange.
Circle has a board of directors stacked with regulatory and venture heavyweights, which would presumably come in handy for both the legal and financial ends of swallowing an exchange. Jim Breyer led the first institutional round in Facebook in 2005 and an early round in Etsy in 2008 and joined both company’s boards. With that track record, his leadership of Circle’s Series A and membership on its board signaled to other investors that Circle was serious about its ambition to use crypto to compete with Paypal and Venmo.
Similarly, Circle board member Raj Date had earlier replaced the sainted Elizabeth Warren at the United States Consumer Financial Protection Bureau. A Berkeley grad who went to Harvard Law, Date is steeped in the thorny realm of financial services regulation.
In a brief phone call about the pending deal, Date told Modern Consensus, “I can’t comment on anything like that. I’m actually in Europe right now. Thanks for the reach out.”
Another source confirmed that a deal was nearly consummated but wasn’t sure that it was KYC requirements that needed to be overcome. This source, who declined to be quoted, thought that it was a matter of Poloniex needing money transmitter licenses in place before it could be acquired.