Crypto exchange Kraken acquires Circle's once mighty OTC desk

Circle, the Boston-based cryptocurrency firm, has sold its once-mighty over-the-counter (OTC) trading (OTC) operation to Kraken. 

Founded in 2013, Circle is one of the earliest players in the digital assets field and its OTC desk was once known as one of the most profitable businesses in the market. Kraken confirmed the sale when reached for comment.

In a blog post announcing the move, Circle co-founders Jeremy Allaire and Sean Neville wrote that "we have known and admired Jesse and his team at Kraken for many years, and we have every confidence and expectation that Circle Trade customers and partners will continue to find best-in-class OTC liquidity service and responsiveness through Kraken going forward."

"Circle Trade represents an enormous success for the industry as well as for Circle, and we’re excited to see Kraken grow it further," they added.

The deal shouldn't come as a surprise as Circle has been looking for a buyer for its OTC desk since the summer, according to sources. Nick Gustafson, who has led the OTC desk for Circle since August, previously worked for Kraken.

In March, Circle laid off around 30 employees in its finance department – approximately 10% of its entire staff – which Circle attributed to the challenging regulatory environment in the U.S. Its OTC business also suffered from an outflow of talent, including its former head of OTC trading in Hong Kong, Ryan Salame.

According to an official blog post published last January, the desk saw a notional volume of $24 billion in 2018. However, the company hit a rough patch in 2019.

In August, Circle Trade's head Daniel Matuszewski resigned to start his own trading firm with Bobby Cho, who previously led DRW's cryptocurrency trading desk, Cumberland. 

Then, Poloniex, the cryptocurrency exchange that Circle acquired for $400 million in 2018 spun off from its parent company.

Circle also announced its plans to shut down one of its payment apps, Circle Pay, in June and put a pause on its research arm, Circle Research, in September.

Kraken's OTC operation is led by Nelson Minier, a 20 year veteran of the Wall Street world who joined in 2018. Minier previously held positions at JPMorgan, Credit Suisse and Bear Sterns.

As for the future of Circle Trade under Kraken's helm, Kraken said in a statement it will help them capture marketshare in Asia and offer "deeper liquidity and tighter spreads across all supported assets."

Clarification: Gustufson has led Circle's OTC desk since August, and previously worked for Kraken.