Circle CEO Jeremy Allaire is an advocate for stablecoins
Photo: Heidi Gutman/CNBC/NBCU Photo Bank/NBCUniversal via Getty Images

What Circle’s SPAC says about the future of stablecoins

Protocol Fintech

Hello and welcome to Protocol | Fintech! This Friday: Circle's going SPAC, Square commits to a hardware wallet and Google's moves in Japan.

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The Big Story

Not wobbly on stablecoins

Stablecoins are bitcoin's boring kid brother — all the cryptographic wonkiness, none of the thrilling potential for speculative price appreciation! But as the cryptocurrency industry matures beyond just mining and trading into payments and commerce, the digital tokens designed to maintain a steady price are looking hotter and hotter.

The latest sign of the rise of stablecoins is Circle's announcement of a deal to go public via a SPAC. Circle is the main company behind USD Coin, or USDC, the second-largest stablecoin with a market cap of $25.9 billion, according to CoinMarketCap. The SPAC deal, with Concord Acquisition Corp., values the company at $4.5 billion. Circle and Coinbase back USDC through a consortium called Centre.

Circle is offering investors a way to bet on the rise of stablecoins. Stablecoins are useless to speculators. But for those who believe in the transformative potential of cryptocurrencies, they're an attractive concept.

  • The price volatility of bitcoin and other cryptocurrencies has made them difficult to use for basic things like making payments. Retailers don't want to take a currency that can lose a substantial amount of value overnight.
  • But stablecoins aren't just a way for investors and traders to reckon with volatility. They can be used for lending and crowdfunding. And they also play a key role in bridging fiat currencies and crypto transactions, lowering the cost of converting crypto to dollars and vice versa.
  • Trading volume of stablecoins quadrupled last year, hitting $1 trillion.

A controversy over stablecoins: How stable are they? The question could be critical for Circle.

  • Stablecoins are backed by collateral, which can be fiat currency or other cryptocurrencies.
  • Eric Rosengren, the president of the Federal Reserve Bank of Boston, recently called tether, the largest stablecoin, a "financial stability challenge." Financial experts were alarmed by the disclosure that nearly half of its reserves were in commercial paper — a higher proportion than most money market funds. A mass redemption of tether could "affect the stability of short-term credit markets," Fitch said.
  • Circle, by contrast, holds dollar-for-dollar reserves for USDC. It earns interest on those reserves, which it shares with Coinbase.
  • Circle has tried to allay concerns that stablecoins are a replacement for fiat currency or central banks. "USDC is not displacing the existing central bank money," said Circle CEO Jeremy Allaire in the investor call Thursday. "It sits inside that two-tiered banking system. It's not volatile like other cryptocurrencies. But it's also not bound by the limitations that exist in the existing fiat currency system. It's a dramatically better dollar digital currency model."

But the real money for Circle is in transaction services. That highlights the utility of stablecoins for payments and enabling other forms of financial services — as well as brand-new businesses like NFTs, the digital art certificates that collectors are flocking to.

  • Circle's transaction and treasury business generates more money than its USDC-related business, Coindesk notes.
  • Dapper Labs, maker of NBA Top Shot, uses Circle systems for fiat-currency payments that can settle in USDC. Digital asset exchange FTX uses Circle APIs for bank transfers.
  • Visa has even integrated USDC into its VisaNet system so it can settle card transactions over public blockchains using the stablecoin.
  • Circle also has SeedInvest, a crowdfunding company which aims to help startups raise money via crypto transactions.

Still, Circle's business depends on the growing acceptance of stablecoins. The regulatory outlook for stablecoins is still not clear, and USDC could be swept up in concerns about other coins. It will be a while before we know how stable Circle really is.

— Tomio Geron


Companies need to transform technology into opportunity. Broadridge helps you drive the innovation roadmap by simplifying the complex. It's time to accelerate the adoption of AI, blockchain, the cloud and digital to transform your business. See how you can stay ahead with next-gen technologies that deliver on what matters most.

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Join Protocol's David Pierce for a conversation with Smart Columbus' Jordan Davis, Sidewalk Infrastructure Partners (SIP)'s Jonathan Winer and Microsoft's Jeremy Goldberg on what it takes to build smart cities right. July 13 @ 11 a.m. PT / 2 p.m. ET Learn more


From Protocol | Fintech

China's crypto crackdown widens. Now regulators' targets include software companies, Ben reports.


  • "If you are in the #bitcoin mining space, please reach out. We WANT you in Wyoming." — Sen. Cynthia Lummis, reacting to China's crackdown on bitcoin mining and trading.
  • "We have decided to build a hardware wallet and service to make bitcoin custody more mainstream. We'll continue to ask and answer questions in the open. This community's response to our thread about this project has been awesome — encouraging, generous, collaborative, and inspiring." — Square's head of hardware Jesse Dorogusker, on Square's decision to build a hardware wallet.
  • "Gold is competing with crypto to the same extent it is competing with other risky assets such as equities and cyclical commodities. We view gold as a defensive inflation hedge and crypto as a risk-on inflation hedge." Goldman Sachs note analyzing bitcoin, ether and gold.
  • "If it was $100, I wouldn't sweat it. But it was everything I had for my kids. … It's been torture." — Chime customer Jonathan Marrero on losing access to his online banking account.

3 Questions With...

Wayne Chang, co-founder, Digits

What fintech trend is most troubling for you?

Fragmentation. The rise of fintech startups over the past few years has introduced much-needed innovation into the space, but it comes with a major cost that not enough people are focused on. There are now dozens of corporate cards and expense management products, countless one-off reporting tools, planning tools, and budgeting systems. Business owners have no single source of truth, and the data they are getting from each of their systems is often incomplete or flat-out disagrees. I believe that a consolidation war is coming.

What fintech company — besides your own — have you been most impressed with this past year?

ScaleFactor, for its ambition. It recognized a huge opportunity — the need to bring modern software and innovation to the accounting landscape — and pursued it aggressively. Unfortunately, it chose the wrong model and made the mistake of taking on both the software and the services businesses under one roof, but I don't fault them for trying.

What problem would you like to see a fintech company solve?

Real-time finance. For almost every business owner today, their finances are stuck in the past. The accounting-industry reality is a 15-21 day close. That means that by the time you find out how June went, July is more than half over! As a business owner, you're no longer worried about June! You're focused on August!

Need to Know

  • Google in talks to buy Japan's pring. The move to buy the cashless payment and settlement startup would put Google into financial services in Japan.
  • Wise went public in London. The money transfer services company made its trading debut through a direct listing on London Stock Exchange which valued it at more than $11 billion.
  • Bank of New York Mellon is buying Milestone Group. The investment banking company said acquiring the fund management tech firm "will advance the digitization and automation of core accounting and asset services."
  • The UFC struck a deal with The mixed martial arts organization designated the company as its first official "cryptocurrency platform partner."

Making Moves

  • Chris Cracchiolo will join Walmart+ as senior vice president and general manager. Cracchiolo, who will run the membership program that includes payment features, had served as an executive for nearly two decades at American Express.
  • Joanne Hannaford is joining Credit Suisse'snew chief technology and operations officer. Hannaford spent more than two decades at Goldman Sachs where she was head of EMEA technology and global head of quality assurance engineering.
  • Elizabeth Hoemeke was named chief information officer of One Inc. She previously served as senior vice president for enterprise engineering and technology strategy at U.S. Bank.
  • Justin Overdorff joined Lightspeed Venture Partners. The former Stripe dealmaker will lead fintech investments out of New York City.

Deal Flow


Companies need to transform technology into opportunity. Broadridge helps you drive the innovation roadmap by simplifying the complex. It's time to accelerate the adoption of AI, blockchain, the cloud and digital to transform your business. See how you can stay ahead with next-gen technologies that deliver on what matters most.

Learn more

Data Point

$5.3 billion

That's the total invested in London-based fintech companies in the first half of 2021, up from $2.1 billion year-over-year, and the biggest total ever for the period.

Thanks for reading — see you Tuesday!

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