Crypto Startup Circle Raises $110 million, Plans To Issue USD-Backed Coin

Announcements, Investing | May 16, 2018 By:

Cryptocurrency platform Circle has raised $110 million in a financing round led by Chinese crypto mining giant Bitmain. Also participating in the financing round are existing investors IDG Capital, Breyer Capital, General Catalyst, Accel, Digital Currency Group, and Pantera, along with new investors Blockchain Capital and Tusk Ventures.

Founded by Jeremy Allaire and Sean Neville in 2013, Circle is a peer-to-peer payments technology company. It is one of the most well-funded blockchain startups, with investors including Goldman Sachs Group and Baidu. Since its inception, the company has grown to encompass multiple products, including Circle Invest, Circle Trade, Circle Pay, and Poloniex.

Along with the new investment, Circle also announced that it would create a new cryptocurrency pegged to the price of the US dollar, which is meant to solve a key problem in digital currencies’ use case: volatility. Called Circle USD Coin (USDC), the stable coin would be based on the open source fiat stable coin framework developed and governed by Centre, an open-source initiative from Circle. Bitmain will also join Centre in building USDC.

“Bitmain will also join Centre’s efforts to introduce multiple fiat-backed stablecoins and provide financial interoperability around the world,” Circle said. “This partnership will help drive global interoperability that benefits consumers, business ventures, institutions, and marketplaces everywhere. Specifically, Bitmain will help Centre introduce multiple fiat stablecoins in a variety of geo-currency zones.”

Circle believes a cryptocurrency whose value is pegged to a stable traditional currency can help drive adoption of blockchain-based systems.

“It is difficult to use something like bitcoin if the volatility is so high,” said Jeremy Allaire, CEO of Circle. “Something like this makes it more possible. It unlocks an incredible amount of power for the dollar. It’s basically a dollar that operates on blockchain.”

Allaire said that they will eventually add tokens for the euro and pound, but it’s less likely they’ll immediately look to peg most Asian currencies because of existing competition in that arena.

Other companies, such as Tether and Basis, also have offered stable coins with a value tied to the US dollar. But Allaire said “existing fiat-backed (cryptocurrency) approaches have lacked financial and operational transparency, have operated in unregulated jurisdictions with unknown banking and audit partners, and have been built as closed-loop ecosystems and closed proprietary technologies.”

“Circle USDC addresses these problems by providing detailed financial and operational transparency, operating within the regulated framework of US money transmission laws, and reinforced by established banking partners and auditors,” Allaire said. “It is built on an open source framework with an open membership scheme that eligible Financial Institutions (FI) can participate in (Centre). USDC will be ERC-20 tokens minted, issued, and redeemed based on network rules defined by Centre.”