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Financial Services Firm Circle Is Cozy With Regulators, Wall Street

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  • David Dinkins
    ⭐ Features

    Circle is partially owned by Goldman Sachs and has an unusually friendly relationship with regulators.

Financial Services Firm Circle Is Cozy With Regulators, Wall Street
Cover image via u.today

Circle, the financial services company that is buying altcoin exchange Poloniex for $400 mln, has an unusually friendly relationship with Wall Street bankers and financial regulators. This coziness has raised a number of eyebrows in the notoriously anti-establishment digital currency space.

It’s complicated

Cryptocurrency enthusiasts have a complicated relationship with Wall Street, who they generally eye with skepticism. On one hand, bankers represent everything that is wrong with the existing fiat-based financial system, as exemplified by the excesses of the housing bubble and the subsequent bail-outs. On the other hand, it’s hard to deny that Wall Street’s interest in digital currencies has helped to raise cryptocurrency’s profile – and price.

The inventor of Bitcoin himself, Satoshi Nakamoto, encoded a not-so-subtle swipe at bankers in Bitcoin’s genesis block:

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

Goldman Sachs

If Wall Street is in many ways the enemy of crypto enthusiasts, then Goldman Sachs is nothing less than the devil himself. The white-shoe investment bank is notorious for its connections with the US government, which critics call a veritable revolving door. In fact, some have taken to calling the bank “Government Sachs.”

The current treasury secretary, Steve Mnuchin, is a former Goldman exec, as are past treasury secretaries Hank Paulson and Robert Rubin. Countless lower-level government officials are alums of Goldman or have close ties to the bank. One former CEO of Goldman Sachs, Jon Corzine, resigned to become a US senator and later governor of New Jersey.

Goldman Sachs also has its fingers in the crypto pie, with enough investments in the sector to warrant a warning in its annual disclosure to the SEC. The bank warned that its connections to businesses in the cryptocurrency space constitutes a possible risk to shareholders. Guess who Goldman owns a significant stake in? Circle.

Regulator-friendly

Circle also has a reputation of being cozy with regulators. In an era where the CEO of Apple is willing to defy federal courts to protect users’ privacy, or where the crypto exchange Coinbase has taken the IRS to court and won a partial victory, Circle’s friendliness with regulators is a bridge too far from many enthusiasts. When asked at a conference if Circle would comply with a federal subpoena asking for users’ information, CEO Jeremy Allaire said “Hell yeah, of course!”

Today, news broke of an agreement between Circle and the SEC over the acquisition of Poloniex. According to a leaked slide from a confidential Circle presentation, the SEC went so far as to promise absolution for any of Poloniex’s regulatory violations if Circle agreed to take them over and put the exchange on the straight-and-narrow.

While such a closeness with bankers and regulators may make crypto-anarchists unhappy, it could very well propel Circle to greater success. Sometimes the path of least resistance is compliance, and whether the community likes it or not, Circle has apparently decided to go that route.

About the author

David Dinkins is a freelance writer who holds a Master of Arts in history from Louisiana Tech University and has extensive teaching experience both at LSU – Shreveport and University of Phoenix. He got involved with cryptocurrency in early 2014 working as part of the Dash Core Team and have served in the role of writer/editor (mostly editor) during that time. He has edited a huge number of documents for the Core Team, including the Evolution whitepaper, the PrivateSend whitepaper, and many of Evan Duffield’s communications with the Dash Community.

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Bitcoin Price Can Be Easily Pushed Down by Whales: Professor John Griffin

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  • Alex Dovbnya
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    John Griffin says that rapid price swings are possible because it can be manipulated by deep-pocketed whales who are not stronger than ever

Bitcoin Price Can Be Easily Pushed Down by Whales: Professor John Griffin
Cover image via u.today

Economics professor John Griffin recently rang alarm bells over the impact of Bitcoin whales on the Bitcoin market. 

Griffin told Bloomberg that a few large players could easily push the BTC price down at a whim. 

"The problem with a few large players holding crypto is that when they sell they can easily push the price down, which makes the market susceptible to rapid swings."  

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Whales are getting more powerful 

According to data released by CoinMetrics, the number of orange coins controlled by deep-pocketed Bitcoin investors reached its highest point in four years in 2019. As of December, a whopping 42.1 percent of Bitcoin's total circulating supply is stored in wallets that hold between 1,000 and 1 mln BTC. 

While crypto exchanges are known to be the owners of the richest Bitcoin addresses, investor Aaron Brown warms some of the new whales on the block are family offices and affluent individuals who are not exactly keen Bitcoin believers who might be tempted to jump ship if things turn south. 

“I doubt they have infinite patience, and without significant growth in actual use, I would expect them to quietly withdraw to chase other promising technologies,” Brown said.

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Becrying Tether's impact on Bitcoin 

Speaking of those who don't believe in Bitcoin, Griffin probably takes the cake as one of the most prominent naysayers. Back in June 2018, together with his colleague Amin Shams, he published a paper that explores how Tether was allegedly responsible for propelling Bitcoin to new highs during the peak of the previous bull market in December 2018. 

At the beginning of November, the two academics came up with an even more shooking claim -- the historic ascent of Bitcoin to its current all-time high of $20,000 was the deed of a single whale on Bitfinex, the affiliated exchange of Tether.

Tether dismissed the updated study as a puff piece that was meant to back up a $1.4 trln lawsuit against the flagship stablecoin issuer. 

About the author

Alex Dovbnya (aka AlexMorris) is a cryptocurrency expert, trader and journalist with an extensive experience of covering everything related to the burgeoning industry — from price analysis to Blockchain disruption. Alex authored more than 1,000 stories for U.Today, CryptoComes and other fintech media outlets. He’s particularly interested in regulatory trends around the globe that are shaping the future of digital assets.

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