TL;DR: Both Circle and Poloniex issued statements today, outlining what they’re characterizing as a “spin-out” from the peer-to-peer payments platform by the exchange into the financial arms of a $100 million arrangement with an Asian investment firm. Poloniex also announced it would stop US customers from trading as of 1 November 2019.
Poloniex Leaves Circle
Poloniex Spins Out from Circle with New Backing & Global Focus, came the team’s blog post, announcing they “are spinning out from Circle into a new company, Polo Digital Assets, Ltd., with the backing of a major investment group. The spinout will free us to focus on the needs of global crypto traders with new features, assets and services. Our first new offer to Poloniex traders is that effective October 21, 2019, all spot trading fees will be reduced to 0% until the end of the year.”
The exchange was purchased by Circle in late February of 2018 for nearly half a billion dollars, which apparently included plans to restructure Poloniex into an SEC-regulated affair within the US. At the time, before leaked revelations appeared, enthusiasts and analysts alike were baffled at Cirlce’s purchase.
New York Times reporter Nathaniel Popper obtained internal Circle documents apparently pointing to how the SEC “informally” indicated it “would ‘not pursue any enforcement action for prior activity’ at Poloniex as long as Circle cleans up Poloniex and turns it into a regulated exchange,” which in turn led many observers to conclude that was indeed the motive behind such an acquisition. Those plans, over the next nearly two years, never materialized.
In fact, Poloniex is now leaving the US market altogether. “Going forward,” the exchange continued in today’s post, “we have a multiyear plan to spend more than $100M to develop and expand Poloniex,” however, “we will not be able to include US customers in the spin out, so Circle will be winding down operations for US Poloniex customers. Beginning today, US persons will no longer be able to create new accounts on Poloniex. Starting on November 1, 2019, US customers will no longer be able to execute trades on the exchange. When trading ends, US customers will still be able to withdraw their assets through Circle until at least December 15, 2019.”
A spin-out, spinout, spin out, however it is used, is a particularly American legal corporate realignment technique. The word “independent” becomes especially important on a public level, and both Circle and Poloniex were careful to use it in their respective posts today. In most cases, the SEC requires a formal explanation of the move. What a spin-out usually does mean, business-wise, is that the division in question will do better on its own, freeing up precious parent company resources in the process.
For its part, Circle termed the spin-out “bittersweet,” as once high hopes for the initial teaming soon tuned into facing “challenges as a US company growing a competitive international exchange. This spin-out will finally give Poloniex the freedom and capital to compete in the international market, and the leadership team of Poloniex will be equipped to scale and grow beyond the scope of what Circle can provide.”
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