Poloniex & Circle Relationship Explained

Originally posted on 01/05/2021 @ 10:16

Circle, the cryptoservices company backed by major banks Goldman Sachs, is urging its US customers to withdraw cryptocurrency assets by December 16, 2019. Circle says it will start charging Poloniex US customers if they don’t withdraw their assets as quickly as possible. The Poloniex team management has spun off Circle from its parent company Poloniex Financial Services Ltd.

Circle, a global blockchain finance company, has finally made its decision to divest itself of the cryptocurrency exchange Poloniex. US clients have been trading on the Poloniex exchange since November 1, but are not subject to the withdrawal fee for their assets.

In the announcement, the company said it could potentially begin charging Poloniex customers in the US a fee for withdrawing their assets. According to the statement, US Circle customers who fail to withdraw their money could lose all assets they have in their account – Poloniex U, S. accounts traded and stored in US DC and which must withdraw funds – under USDC rules.

The Internal Revenue Service (IRS) has been authorized by a federal court in the District of Massachusetts to issue subpoenas to Boston – the blockchain payment service provider Circle and its parent company Poloniex. The IRS is gaining access to records of two cryptocurrencies – Circle and Poloniex – as part of its efforts to root out tax evasion by US investors, according to the court order.

The lawsuit will ask Circle and Poloniex to share information about US customers who made transactions worth more than $500,000 in Bitcoin and other cryptocurrencies between 2016 and 2020. Circle, a respected payment and cryptocurrency trading company, recently bought Poloniex, the cryptocurrency exchange, in a deal rumoured to be worth $400 million.

Circle Pay is a consumer-focused money transfer app, and Circle Trade is an online trading platform for bitcoin and other cryptocurrencies as well as other digital currencies.

Circle & Poloniex

The peer-to-peer payment platform, launched in 2013, enables instant word processing and sends transactions via the blockchain. In October, Circle unveiled a new version of its mobile payment app that simplifies the collaboration between different payment apps.

In 2015, the company received its first ever BitLicense from the US Securities and Exchange Commission and the Federal Reserve Bank of New York. In 2016, the company also received its first UK virtual currency licence.

In 2016, Circle Pay allowed bitcoin exchanges on its platform, but stopped the service to focus on international payments and transfers. Circle Trade, however, offered its customers crypto-liquidity options and generated revenues of around $60 million from this service alone between November 2017 and January 2018. In February 2018, poloniex was bought by a private equity firm with a $1.5 million investment in the company.

The current Poloniex exchange is now owned by Asia Pacific Investment Management Company Ltd. (APIMC). In January 2019, Poloniex stopped supporting US-based users and designated 15 December 2019 as the last day for funds to be transferred to the platform.

Poloniex has discontinued the service for US users to avoid complications with US legislation. Regulators are also looking at the so-called customer KYC, the registration and verification of customers, as well as the issuance of licences to foreign exchanges.

A Reuters investigation published in September found that Poloniex allowed customers to trade cryptocurrencies and withdraw money without providing only the country’s name and email address. Allaire could not confirm whether the exchange had the identities of existing customers, but said it had all new customers fully checked by KYC. We know we have a huge customer backlog at KYC, “he said.

Since the takeover of the stock exchange in 2018, the county’s disputes with Poloniex have been widely reported. After successful efforts to revive the company by relocating some operations to Bermuda, the two companies decided to separate and announced the separation on November 1. Circle ended trading in the US for all Poloniex customers on November 1, but did not specify what impact this would have on its customers, other than to announce a December 16 deadline.

Circle’s Twitter announcement was met with unduly negative feedback, with many users criticising the condescending tone of the company’s announcement.

Last October, Boston-based financial services firm Circle, backed by Goldman Sachs, announced it would spin off the cryptocurrency Poloniex from its parent company Tron before selling it to an investment group with the support of Tron founder Justin Sun.

The two brands were spun off from Poloniex, which caused a stir around brand integrity when Circle threatened to cede investor assets to the government and keep those assets on the platform. Finally, Circle focused on USDC, a stable coin, and the strategy of the two companies to tap into the emerging fintech industry was to support Circle and buy Tron to tap into US investors “interest in the cryptocurrency market. But when US regulators began to put pressure on platforms that cater to US investors “interest in cryptocurrencies such as Bitcoin and Ethereum, Poloniex began to suffer and Circle eventually closed. 

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