Poloniex, one of the oldest cryptocurrency exchanges in the market, has recently initiated the process of shutting down its crypto margin and lending products for US-based users.
In an official announcement released on October 4, the Poloniex team stated:
“By the end of the year, we’re taking steps to remove our margin and lending products for US-based customers. These changes are part of our ongoing commitment to ensure that Poloniex complies with regulatory requirements in every jurisdiction.”
Factors Behind the Decision of Poloniex
Prior to the launch of BitMEX in 2014, the most widely utilized cryptocurrency exchange for margin trading, Poloniex served most of the active traders in the digital asset exchange market. Poloniex launched in January of 2014 and it appealed to many traders due to its integration of many tokens and digital assets.
However, the exchange started to struggle with a backlog of customer support tickets, which eventually led Circle, a Goldman Sachs-backed cryptocurrency behemoth, acquired Poloniex at a valuation of $400 million.
This week, Circle stated that its primary vision with Poloniex is to professionalize and improve the exchange in terms of security, compliance, and efficiency. As a part of the initiative, the company decided to shut down margin trading and delist several tokens.
“As part of our effort to continuously professionalize and improve Poloniex, we are delisting several assets and taking steps to remove our margin and lending products for US-based customers,” the Circle team said.
It is possible that the shut down of 1Broker, a popular cryptocurrency exchange, by the US Securities and Exchange Commission (SEC) and the Federal Bureau of Investigation (FBI) for illegal distribution of securities have led exchanges in the US to be more cautious with their approach in supporting cryptocurrencies and trading activities.
The seizure of the domain of 1Broker by the FBI was taken aback by the cryptocurrency community because 1Broker is not based in the US. As a Marshall Islands-based company, 1Broker was not focused on providing services to investors in the US market.
Yet, the US authorities proceeded with the crackdown on the exchange, shutting down its platform and services.
To prevent being in conflict with the authorities, cryptocurrency exchanges have started to implement better Know Your Customer (KYC) and Anti-Money Laundering (AML) systems, actively cooperating with regulators.
Mixed Response
Several users of Poloniex have responded positively to the approach of Circle, as it would allow the exchange to solidify its position in the US market as one of the few fully compliant trading platforms.
But, many loyal users of the exchange reacted negatively to the delisting of tokens and elimination of margin trading. One user commented:
“The acquisition/takeover of Poloniex by Circle has been a fail. they KYC’d everyone and half the users left, then burned most of their users after delisting more than 30% of their coins and more users left, and now they are removing margin/funding services.”
Users are concerned that Poloniex is shifting from its roots of being an exchange with support for a wide range of cryptocurrencies and tokens, and it may lose the tight competition with Coinbase and Gemini.
The post What Prompted Poloniex to Abruptly Shutdown Crypto Margin Trading? appeared first on NewsBTC.
Source: News BTC
Original Post: What Prompted Poloniex to Abruptly Shutdown Crypto Margin Trading?
