Poloniex and Circle part ways – U.S. traders left behind

Without the backing of Circle, which acquired the exchange in early 2018, Poloniex will be leaning on an anonymous Asian investment group that is thought to be helmed by Tron’s Justin Sun.

The decision to drop Poloniex comes after a difficult year for Circle, which saw the Goldman Sachs-backed firm lay off about 30 team members in response to an "increasingly restrictive regulatory climate in the United States.”

In a blog post, Circle founders Sean Neville and Jeremy Allaire point to the unforgiving regulatory environment for the sale of Poloniex, which they claim will allow the exchange to move beyond the barriers that have been preventing growth:

"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."

A ‘bittersweet’ departure

Poloniex was picked up by Circle two years ago in a deal rumoured to be worth $400m, and the merger was taken by the industry as a sign of increased interest in cryptocurrency firms from mainstream payment players.

Circle’s strong banking links promised to push Poloniex forward to help compete with newcomer Binance, which at the time lacked fiat trading functionality.

Since then, Poloniex is said to have moved forward with infrastructure improvements.

Neville and Allaire claim it is “bittersweet” for Circle to let go of Poloniex, but justified in light of the challenges faced as a "U.S. company growing a competitive international exchange."

Instead of building Poloniex, Circle will now be redirecting its energies into new projects that use "blockchain protocols for everyday payments," and plans to use APIs for its proprietary stablecoin USDC to open up Circle for developers "who want to integrate crypto into their apps and services."

From Circle to Tron?

According to anonymous members of Circle staff that spoke to The Block, the Asian investment group taking over Poloniex is headed by Justin Sun.

The Tron founder and BitTorrent CEO is said to have visited Circle’s Boston headquarters to ink the deal in person, though he has failed to confirm if the rumours are true — making only a cryptic statement on Twitter that he was not buying, and only investing:

"I’m not buying anything. Just invest some and help out my friends. Actually I have a huge bag of $BNB, $HT, $OKB etc and bet on all exchanges that support $TRX & $BTT," tweeted Sun

With the new backing, Poloniex plans to go global, and is launching an aggressive expansion effort that involves $100 million in investment. It says it is "hiring aggressively across all major business and technical functions" to build what is referred to in an email to customers as a "wide range of exciting new features and capabilities."

In a bid to attract new customers, the exchange will also reduce all spot trading fees to zero percent until the end of 2019. US traders, however, are already prevented from registering and will no longer be able to trade on the exchange from November 1st.

This has provoked consternatation across the crypto community, with DigiByte founder Jared Tate tweeting that the closure of Poloniex is "one major step backward for crypto in the USA."

Excluded American citizens now have a shrinking number of trading platforms available to them.

Competitor Bittrex has been in the process of "disengaging from U.S. retail customers," and after turning away verification requests for US citizens in August 2017, severely restricted the number of markets available to them in June 2019.

Since blocking US traders in September,Binance has returned to the US market with a stripped down version of its main exchange that offers just a handful of crypto currencies.