The intersection of cryptocurrencies and payments is spawning a new breed of companies centered around “stablecoins.” And for companies in this space, there is a lot of potential money to be made and plenty of investors willing to help.
Circle, which describes itself as a global technology firm offering payments and treasury infrastructure for internet businesses, has raised $440 million in a private equity round of funding from institutional and strategic investors. The financing included investments from Fidelity Management and Research Company, Marshall Wace, Willett Advisors, Intersection Fintech Ventures, Atlas Merchant Capital, Digital Currency Group, FTX, Breyer Capital, Valor Capital Group, Pillar VC, as well as Michael J. Price and Friends.
According to Crunchbase, Circle has now raised $711 million across nine funding rounds. The Block reported that Circle is considering going public via a special purpose acquisition corporation (SPAC) deal at a $4 billion valuation. The publication did not disclose who a potential SPAC partner may be.
Circle offers the USD Coin (USDC), a digital stablecoin with its value tied to the U.S. dollar. There is $22 billion worth of USDC now in circulation, and the company has seen 436% growth in 2021 and 28,000% growth over the past 12 months, it said.
“As a company, Circle has remained committed to our mission of raising global economic prosperity through the power of digital currency, blockchains and breakthroughs in programmable money,” said Jeremy Allaire, co-founder and CEO, in a statement. “The sustained global demand for our services powering the growth of USDC, as the most trusted and well-regulated dollar digital currency, signals that we are one step closer to achieving our mission. With powerful backers who are committed to our mission and vision, we will redouble our efforts to expand into new markets, continue driving fundamental technology innovation and grow our team,” said Jeremy Allaire, Circle co-founder and CEO.
Stablecoins are a cryptocurrency that measures its value against fiat money, gold or other assets. Unlike Bitcoin, which on May 10 was trading above $58,000 but had fallen to approximately $33,000 by last Saturday, a stablecoin is only as volatile as the fiat currency (or gold) it is referenced against. That means 1 USDC would still hold the same value a week or month in the future, unlike the holder of a Bitcoin, which saw its value plummet more than 40% at one point.
Circle utilizes a blockchain to manage transactions using USDC. The company said its platform has now enabled more than 10 million retail customers and more than 1,000 businesses to conduct over 100 million transactions worth more than $615 billion.
“Circle has been a pioneer in unlocking the potential of blockchain-enabled payments. With USDC’s extraordinary growth, Circle has established itself at the center of a new generation of financial services and applications. We are proud to continue to partner with Circle to develop a better global financial system,” said Barry Silbert, founder and CEO of Digital Currency Group.
Circle works with Coinbase and the Centre Consortium to oversee standards and protocol for the USDC digital currency.
As more of the global economy has moved online, cryptocurrencies have gained in popularity as a payment method. Josh Brooks, head of marketing at OnBuy.co, said that cryptocurrencies represent an opportunity for retailers to reach new customers.
“With the ability to appease consumer demand for immediacy and security, while expanding market share for retailers, cryptocurrencies could prove extremely beneficial for the e-commerce industry if adopted efficiently,” Brooks wrote in a recent commentary for Global Banking and Finance Review. “More and more companies have grown to understand these benefits, leading to a surge in consumer attention, and it may not be long before we start to see the commercial use of cryptocurrency as standard.”
The reason cryptocurrencies appeal to retailers is the global nature of e-commerce. With consumers able to purchase from any site — in any country — cryptocurrencies represent a simplified transaction process.
“Fiat money is the government-issued currency used as standard in any given country, like British pounds or U.S. dollars,” Brooks said. “While OnBuy is circumventing this concern for its retailers by providing auto-currency conversion and using PayPal to process global payments, cryptocurrencies also negate this concern entirely as they can be used in every country of the world without having to adapt prices or currencies, making global expansion far more streamlined for businesses.”