Circle to Buy SeedInvest to Help Startups Raise Cash With Crypto

(Bloomberg) -- Circle Internet Financial Ltd., one of the most valuable U.S. cryptocurrency marketplaces, agreed to acquire crowdfunding firm SeedInvest as it seeks to help startups issue digital tokens and allow its own customers to trade a wider variety of coins.

Terms of the transaction were not disclosed. SeedInvest, founded in 2012, helps private companies raise money from individuals on the internet. Investors can browse through businesses on the platform and then, depending on their eligibility, buy a piece of their favorite one. The New York-based firm facilitates the equity-crowdfunding service through its broker-dealer, SI Securities LLC.

If approved by regulators, the acquisition could help Circle do what SeedInvest does, but with crypto assets. The deal could also put the Boston-based digital-asset exchange operator one step closer to listing tokens that may be considered securities, an increasingly sought after privilege at a time when financial watchdogs are stepping up scrutiny of virtual money.

“This was a company who had been at the forefront of collaborating with government to figure out how to make it possible to innovate in the way people raise capital,” Circle Chief Executive Officer Jeremy Allaire said in an interview. “Crypto securities are going to become a major new category of securities that ultimately every business is going to adopt, just like every business has a website.”

Mainstream trading platforms have been reluctant to list many assets from so-called initial coin offerings because the tokens could fall under securities rules. The U.S. Securities and Exchange Commission has said most of the coins are securities, which means issuers must register and comply with federal laws -- as do platforms that handle trading. The SEC didn’t immediately respond to a request seeking comment for this story.

Circle, which in June revealed plans to to pursue registration as a brokerage and trading venue, isn’t alone. Coinbase Inc. said the same day that it would purchase a broker-dealer, pending regulatory approval. Crypto exchange Uphold made a similar announcement later that month.

SeedInvest will bring 30 employees to Circle’s New York office, according to a press release. The company, led by CEO Ryan Feit, has raised about $11 million itself, and has helped startups raise more than $120 million.

“It’s not just ‘how do we let companies do ICOs?”’ Allaire said. “It’s ‘how do we support the tokenization of everything?”’

To contact the reporter on this story: Lily Katz in New York at lkatz31@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka, Randall Jensen

©2018 Bloomberg L.P.