What Is Circle X and Why Should Cryptocurrency Exchange Coinbase Be Worried?

Move over, cryptocurrency exchanges. Circle has arrived on the scene.

The venture capital-backed startup has major plans to upend the existing digital currency exchange landscape. Circle recently bought out Poloniex, a popular exchange. This is one of the largest cryptocurrency exchange acquisitions in history, if not the largest, according to CoinDesk. Now, Circle has plans to launch a new type of exchange which it sees as a challenger to reigning platforms like Coinbase.

New Exchange, New Tokens

Circle president Sean Neville explained his vision with a pop culture reference: "Rather than seeing a single Star Wars-type token that is good for everything across the galaxy, we'll see a proliferation of tokens that have different functions."

With that in mind, Circle's new project will provide users access to a wide range of currencies and tokens. In practical terms, this means that Circle customers will have the ability to transact in bitcoin once again (the company disabled the service in December of 2016 on its exchange).

Customers will also be able to trade many other types of cryptocurrencies. Poloniex customers will suddenly be able to capitalize on Circle's licensed and efficient platform, developed over a five-year period with about $140 million in venture capital funding. As Poloniex has faced increasing negative attention over its service in the past several months, this could give the flailing company an important second change.

Circle X

Circle's long-term vision for the project involves a transformation into "Circle X," an exchange that is not specialized. This means the exchange would not only host all types of cryptocurrencies, but it could also be used to trade in traditional equities and new assets. Neville explains that "we see the future of Poloniex as a full marketplace, where tokens can represent all kinds of assets and all kinds of contractual agreements."

Though a highly ambitious goal, Circle X would put pressure on existing cryptocurrency exchanges like Coinbase. It would also aim to compete with other types of trading systems and even fiat currency markets. If successful, Circle X could conceivably siphon off customers from any of a number of different types of exchanges and markets.

Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns bitcoin and ripple.

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