On Friday, Circle announced its latest funding round of $440 million, bringing total funds raised to at least $711 million, according to crunchbase. Circle is best known for the USDC stablecoin, which it founded in association with Coinbase through Centre. However, Circle manages the stablecoin on a day-to-day basis, which has grown from a market capitalization of nearly $4 billion at the start of the year to almost $23 billion today.
The new shareholders are a mix of private equity investors as well as strategic investors. They include Fidelity Management and Research, Michael Bloomberg’s philanthropy firm Willett Advisors, Digital Currency Group, and FTX.
Circle has recently announced several high profile hires, including Dante Disparte, who joined as Chief Strategy Officer from Diem (formerly Libra).
The company describes itself as a payments and treasury infrastructure firm for internet companies. Many of those companies may focus on blockchain, but USDC also provides services to more mainstream firms. We previously described a scenario where dollar receipts to foreign internet firms could be kept in US dollars without the need for a US bank account. Circle also has its eyes on managing treasury funds.
There’s been lots of talk about Bitcoin being used by corporate treasuries, but it’s too risky for most. Circle is proposing that the USDC stablecoin is an alternative option. Why shouldn’t treasurers just put money in a US Dollar account? Because you can get a better return on USDC.
However, most treasurers believe that return always tallies with risk. DeFi interest rates on USDC are just shy of 2%. But during the bull market a few weeks ago, they were as high as 8% and arguably at that level, the return premium might have surpassed the risk.
A long and winding road
People often assume big funding rounds like this one are a walk in the park. But along the way Circle has made a few detours. The company started life with CirclePay, the P2P payments app that may have used cryptocurrency behind the scenes but was heavily integrated with the legacy banking system. After five years, it shut that down in 2019 to focus on stablecoin based payments.
In 2018 it acquired cryptocurrency exchange Poloniex, which it divested fairly quickly in 2019, again to focus on stablecoins.
Its funding mirrored these moves. After raising more than $220 million in 2017-2018, in July 2020, Digital Currency Group invested a comparatively small $25 million. What a difference a year can make.