Payments processor Circle acquires cryptocurrency exchange Poloniex

Payments processor Circle acquires cryptocurrency exchange Poloniex

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Boston-based payments innovator Circle announced the acquisition of cryptocurrency exchange Poloniex for an estimated $400 million.

 

The deal starts what could be a trend of mergers and acquisitions between financial services, fintech and cryptocurrency companies looking to find synergy, growth and profits.

 

On CNBC, ShapeShift CEO Erik Voorhees said “I think this is a really good sign for the industry. It shows that a lot of companies are going to start consolidating and that will bring [out] the best talent…I think you’re going to see a lot of that in 2018. These companies have so much capital at this point.”

 

In December, Asiff Hirji, Coinbase’s president and COO, said on CNBC’s Fast Money that one potential path forward for his company is to go public. Other cryptocurrency exchanges could see a similar strategy in 2018, which would make them more vulnerable and attractive for mergers or acquisition.

 

Circle disrupting financial services

Circle was founded in 2013 and backed by $136 million from investors including Goldman Sachs, IDG China, Breyer Capital, Accel and General Catalyst. The company is one of the best examples of a fintech disruptor in the financial services sector with products including:

-Circle Pay, which lets consumers send and receive money, make mobile payments and share value globally.

-Circle Trade, which serves institutions and investors as one of the world’s largest providers of crypto asset liquidity

-Circle Invest, a new app that enables people to tap into crypto asset investment through a simple, seamless, mobile experience.

 

Poloniex is a prominent cryptocurrency exchange

Wilmington, Delaware headquartered Poloniex launched in 2014 and provides full cryptocurrency exchange services. It ranks in the top 15 cryptocurrency exchanges according to CoinMarketCap.com.

 

Poloniex has had its share of notoriety, losing 12.3% of its total bitcoin assets to hackers in March 2014. It also has received many complaints for decreased customer service levels, outages impacting traders and user accounts being frozen without full disclosure.

 

These are common challenges for cryptocurrency exchanges as they try to scale to handle the fast growth and new account openings.

 

Logical merger with many potential benefits

The Circle acquisition of Poloniex simply makes good business sense for both companies.

 

There are synergies. Circle brings a more disciplined and strategic business with strong systems in place, backed by significant VC capital.

 

Poloniex has a large customer base that Circle will benefit from. Circle will help Poloniex scale with better systems and management strength.

 

Customers within each company will find new products available and you can expect cross-selling to be very effective.

 

Look for more, similar deals to happen in 2018.

 

Author: Jeff Domansky, Managing Editor