According to Forbes:
Crypto is poised to transform payments, says Circle CEO Jeremy Allaire, and the stablecoin maker wants to be at the heart of this future. Known for producing USD Coin (USDC), the leading US dollar-backed stablecoin, Circle is attracting growing attention for its digital currency, with partnerships that include MoneyGram, Mastercard and Plaid. However, the company has far greater ambitions ahead.
“In maybe three, five or ten years the very concept of a cross-border payment will be as absurd as the concept of a cross-border email or a cross-border border browsing session,” says Allaire.
“In an era of everything being connected directly on the internet in an open, accessible way, those concepts will just go away.”
Circle has bold ambitions to play a vital role in this vision, with plans not only to expand the use of USDC but also to develop similar fiat-backed stablecoins for other fiat currencies, such as the Euro. This ambition has also helped swell its valuation, with the company now set to go public in a SPAC merger with Concord Acquisition Corp at a value of $9bn – twice the $4.5bn value initially stated when the deal was first announced in July 2021. It is also forecasting significant revenue growth as its products go live.
However despite this, it is still building traction, and making a case for USDC’s potential benefits beyond crypto-native businesses.
Circle and the rise of USDC
While many cryptocurrencies are notorious for their volatility, USDC is designed to be 1:1 with US dollars, with Circle always holding exact cash to the same value as the USDC it has in circulation, aided by a partnership with Silvergate Bank. At present, it has 53.5bn USDC in circulation, up from an estimated 42bn in late 2021, and by the end of 2022 is projected to reach 110bn USDC.
For users, then, the digital currency is not an opportunity to invest in an asset with a potentially growing value, but instead a means to convert money into a format that Circle argues is faster, cheaper and more secure to use in digital environments.
“USDC is a protocol for representing a fiat currency dollar and for settling that transaction on the public internet,” explains Allaire.
“It’s an open protocol that’s on the public internet; it’s on top of many different public blockchain networks and anyone can plug into that. So if you develop a digital wallet, a financial service or a commerce site, you can just plug into that protocol, you don’t need permission to access it.”
The majority of companies making use of this at present are those primarily operating in the crypto space, such as developers of non-fungible tokens (NFTs). These companies favor USDC over fiat dollars for business operations as they can instantly convert them into other cryptocurrencies as needed, enabling them to conduct all or close to all operations without the need to handle fiat currencies.
However, Circle is keen to expand the digital currency’s use beyond this segment, and doing so will require the company to make the case for USDC’s utility to those who are used to a fiat-only payments system.
An example of where it is beginning to do this is in its partnership with MoneyGram and Stellar, which is enabling MoneyGram customers to instantly send money globally using USDC, with collection in local currencies. This is showcasing potential use cases of the stablecoin, but it also provides individuals with a new way to buy and hold USDC.
“You can imagine the power of someone saying, ‘Okay, I have cash. I’m going to walk into a MoneyGram location. I’m going to give them cash and instead of it being sent and converted with FX out to another MoneyGram location, I get a digital wallet and I get a QR code scan and the cash becomes USDC and is sitting in my digital wallet,’” explains Allaire, adding that customers can then use the money to make P2P payments to one another.
“People talk about last miles and payments or the on and off-ramps. It literally creates that connection between the physical layer and the digital layer, which has optimizations for settlement amongst MoneyGram locations but also can become a really valuable capability for the people that use MoneyGram as a point to go in and out from USDC.”
Crypto ownership for business
While such partnerships are showing USDC’s potential in the remittance space, Circle is also pushing further into the business arena, building on its existing B2B-only approach. This has most recently been in the form of the Circle Account, which Allaire describes as “the equivalent of a digital currency business bank account”.
Launched in late February, this enables businesses to handle and manage digital currency for operational and investment use, and includes the ability to send and receive payments in digital currency as well as store, deposit and withdraw USDC.
“It would be like opening up a commercial bank account as a business but everything operates natively in digital currency,” explains Allaire.
“And it provides the ability to go from existing banking into USDC to use it as a transactional medium.”
It also provides businesses with the ability to earn money from their stored USDC.
“We provide treasury services, so if you want to generate yield by lending your USDC into yield markets,” he explains.
“You can earn interest on your USDC if you want to take that same capability and integrate it and automate it into your own treasury and payments flows. We provide a whole set of API services that are fee-based to integrate that into your own operations.”
The Circle Account has been launched into a fairly sparse market, where businesses interested in handling crypto have few options for services tailored to their specific needs. And while this may be reflective of the relatively low levels of demand for such applications, that is beginning to change, particularly in light of the Russia-Ukraine War. Some businesses with employees or contractors in the region are seeing requests to pay wages to some employees in digital currencies, and so are beginning to grapple with the slim range of solutions to make this possible.
Circle revenue and operating profit, 2019 – 2023E
The potential of ecommerce
While businesses are only beginning to explore the potential of digital currencies, ecommerce has seen growing support for crypto for some time. However, for many users it has been mostly a novelty, hampered by practical issues such as the cost of transaction on widely used blockchains such as Ethereum.
“The cost really went up and the user experience for an end-user with a digital wallet is still fairly high friction,” says Allaire, adding that this is beginning to change due to a new crop of blockchains better designed for ecommerce applications.
“What we’re now seeing is rapid growth in super scalable, very low cost, very fast blockchains that are a bit more purpose-built for retail scale payments,” he says.
He gives the example of the blockchain Solana, which recently launched Solana Pay, a QR code-based payment system that enables payments in digital currencies including USDC.
“That allows someone who has a compatible digital wallet to make a payment. The business can accept the payment, it settles in 400 milliseconds,” explains Allaire.
“It’s almost like a cash transaction: the transaction fee is a 20th of a penny and it can support 60,000 transactions per second, so it’s very meaningful.”
Such potential gives Allaire a highly positive view on the future traction of digital currencies in ecommerce – despite their currently tiny share of the market.
“We expect over the next two years to see a much broader ecosystem, many existing payment services ecosystem players begin to support protocols like this which will open up more and more real commerce opportunities,” he says. “We’re just getting into that space but it’s still on the early side.”
Making money programmable
While businesses may appreciate the value of a digital payment that settles at the same speed as cash, for the consumer it doesn’t represent a notable step up in experience. However, where this may change is in the potential to change how money is manipulated and used through making it into a digital protocol.
Allaire describes this as “the programmability of money”, and he argues that examples in the DeFi world today are beginning to show “real innovation”. One such example is Zebec Pay, a project built on the Solana blockchain that Circle has invested in.
“It’s a streaming payment protocol that allows you to stream payments on demand,” he explains.
“Basically streaming value at a micro-level out to users. So imagine gig economy workers, sharing economy workers who have a digital wallet that supports USDC, and as they complete work, they’re getting streamed payments.”
Another example he gives is from Request Finance, which provides what Allaire describes as an “automated invoice protocol”.
“Now if you want issue invoices out to any digital wallet that is Ethereum based, you now have an invoice protocol. It supports invoices that have USDC payment settlement attached to them,” he says, adding that such projects are early examples of what he sees as a step-change in the use and handling of money.
“The Lego bricks of money are starting to emerge. We’re in the super early stages of that; I’m really excited about what we’re going to see happen there.”