Kraken acquires Circle’s OTC desk

Crypto exchange Kraken has acquired Circle’s OTC business, dubbed Circle Trade, for an undisclosed amount. Circle Trade was a cornerstone of its parent company and considered by many to be one of the most successful crypto OTC desks in the industry before Circle’s shift in strategy in 2019. Kraken said the acquisition would supply its OTC arm with better access to global trading partners, “particularly in Asia,” and more resources to provide deeper liquidity across supported assets.

Why it matters:

• In our Crypto Theses for 2020, we predicted the top crypto infrastructure companies, Kraken included, would spend nearly $1 billion acquiring other companies and businesses over the next two years. While the details of the sale are not public, the deal indicates the industry is slowly consolidating, with a few heavyweight companies (mainly exchanges) at the helm. If market stagnation continues, we could see the rate of consolidation increase.
• The sale is Circle’s second such move in a matter of months. The financial services company also sold Poloniex to Tron Founder, Justin Sun, back in Oct., after acquiring the crypto exchange for a record $400 million in 2018. In a blog post, Circle said these sales were part of an effort to reorganize the company and adopt a new strategy that focuses on providing products and services to support its stablecoin, USDC.
• Yet, despite USDCs success to date, it is not without its own risks. Not only does USDC face the challenge of competing with Tether, which arguably derives a competitive advantage from its unregulated nature, but it also faces the looming threat of CBDCs entering the game and reducing the need for regulated stablecoins.