This week marks an important step for the Boston cryptocurrency scene: a crypto company founded here, Internet circlewill start to negotiate on the New York Stock Exchange.
The company was hatched in 2013 in the Harvard Square offices of General Catalyst, a venture capital company, and it now manages a widely used “digital dollar” called USDC. Cryptocurrency users had put more than $ 60 billion in the Circle USDC currency last month.
The demand seems strong for Circle’s stock. Monday, the company extended The number of shares it will offer to investors in the public market. And the Trump administration reported its support for the cryptocurrency industry, loosening regulatory surveillance and the abolition of proceedings against cryptographic companies such as Coinbase and Gemini.
When it starts to negotiate, Circle could be worth more than $ 7 billion. The initial public offer will also be a victory for General Catalyst, the Cambridge firm which was Among the first investors of Circle; It always has more than 12% of the company.
But what exactly does Circle do and why did he decided to move his head office from downtown Boston to Lower Manhattan at the end of last year? Here are six things to understand on Circle, on the basis of interviews with crypto experts who are not connected to the company.
Circle affairs
Circle manages a kind of “digital dollar”, USDC, also known as Stablecoin. What is stable about it? Ideally, it maintains a relationship one by one with real American dollars, so that a male put in the USDC is worth the value of Buck when it is removed. Unlike cryptocurrencies like Bitcoin or Ethereum, Stablecoins are designed to contain constant value, and they are supported by conservative assets such as the titles issued by the US Treasury or money held in an American bank.
Drew Volpe, founder of First Star Ventures, based in Cambridge, an investment company, said that Circle’s affairs are simple: “They have about sixty billion dollars in dollars. They put them in short -term treasury bills … and they perceive interest. ” So, while you get your USDC transformed into an American dollar when you wish, Circle has collected interest over the period that has been maintained in the USDC.
The USDC is mainly used for two things: access American dollars in places where the banking system is not reliable and allows fast and low cost digital payments. As Matt Walsh, the founder of the Boston ISLEN Island Ventures investment company explains, she is used by “people who want access to US dollars who would otherwise find it difficult to have access to dollars, especially internationally”.
For example, a person in a country like Argentina or Venezuela concerned about the devaluation of currencies could buy the USDC through a local cryptocurrency exchange to preserve their income or their savings in dollars.
Another important use is payments, especially international funds.
“With stablecoins, you just send a peer to a peer to peer, you know, in millisecond,” explains Walsh. This can simplify and reduce the costs of international monetary transfers, compared to traditional money movement systems such as ACH or SWIFT.
Circle moved its headquarters from Boston to New York last year
Although Circle has been founded in Cambridge and that several sources say that CEO Jeremy Allaire still lies in the region, the company announcement That he would move his headquarters from the Boston financial district in Manhattan in early 2025.
Circle rented the whole 87th floor to the One World Trade Center, a skyscraper built next to the Jumelles Tours site. In a press release published last September, Allaire said that the company had “had the privilege of joining the flourishing community of innovators, technologists and financial leaders in New York”. However, the company, with nearly 1,000 employees, said that it had a “first” culture and that the new office would mainly be a “concession space” for meetings, instead of obliging employees to present themselves five days a week.
Walsh noted that “New York is clearly the leader (in cryptocurrency) … as opposed to Boston, where we have the first antagonist of this technology, (American senator) Elizabeth Warren.”
Volpe echoes the fact that the movement drew up with New York to become a hub for regulated cryptographic activity.
Joshua Deems, a Boston -based executive, a Blockchain infrastructure provider, called Circle “a fairly distributed company”, suggesting that New York’s new headquarters is symbolic as well as strategic.
Among the senior executives of Circle, a handful like Allaire, the main vice-president of engineering Michael Tsui, the director of business Kash Razzaghi and the director of strategic engagement Elisabeth Carpenter always list Boston as a location on LinkedIn. But other leaders of the Top Circle are based in Washington, DC, San Francisco, New York and Chicago, according to Linkedin.
Circle is a case study in the difficulty of these days to say exactly where a company is “based” and the circle, like most companies, does not provide a distribution of the place where its employees are.
The company depends on interest rates – and there are other risks
Given that the main activities of Circle capture the propagation between what their assets (mainly treasury bills) earn and the $ 1 it is up to the holders when the USDC is exchanged, “when interest rates are increasing, their income is increasing”, according to Carlos Mercado, a senior data scientist from the Boston Analytics Crypto digital assets and blocking technology for sub-line sub-lines. However, this also means that Circle’s financial performance will fluctuate according to the macroeconomic environment – such as President Trump’s current thrust for a drop in interest rates.
Although the USDC is supported by real assets, it is not assured as bank deposits. Deems said the USDC is also vulnerable to “a de-peg”, where the token could potentially be negotiated below $ 1. Mercado told a real example: “USDC was not negotiated at $ 1 in March 2023” … He was negotiating at 92 cents, 89 cents. »»
This occurred on weekends after a race on the Silicon Valley Bank, which had custody of around 8% of Circle’s assets. This event briefly shaken the confidence of USDC holders in the value of the token. But Mercado said that the circle now uses more diversified and secure banking partners – banks generally considered “too important to fail” by the United States government.
The biggest competitor in the circle is the attachment and the new players could enter the market
Another Stablecoin, Tether (known as USDT), remains the world leader in the circulation of Stablescoin, with around $ 150 billion in value. Tether has “a certain first engine advantage” in regions like Africa, Walsh said. The company recently moved its headquarters to the American Virgin Islands in Salvador.
It was “a bit like the cowboy, the Wild West Stablecoin,” said Volpe. And Mercado noted that the attachment supports its stablecoin with a certain amount of bitcoin, which is subject to fluctuations.
More worrying for investors in Circle’s actions, said Volpe, is Circle’s dependence on distribution partners like Coinbase, a great exchange of cryptocurrency based in San Francisco.
Coinbase retains “100% of the USDC’s (of interest) revenues kept on (sound) exchange, and even 50% of USDC revenues maintained on other platforms, raising questions about Circle’s margins and control of its own ecosystem, explained Volpe.
Other companies, such as Paypal, have already launched their own stablecoins, and traditional players in the payment industry such as Visa and Mastercard could follow suit at a given time, he said.
The circle becomes a symbol of the regulated crypto aligned American
The experts with which I constantly spoke Circle as the “buttoned” alternative to freer offshore cryptographic companies.
“Jeremy (Allaire) and the circle team have really adopted … trying to be open, trying to work with regulators,” said Volpe.
Walsh has argued that stablecoins are “really important for the future of the dollar”, and Allaire was a coherent defender of the creation of a complete federal framework for the regulation of Stablescoin.
In its June 13, 2023, testimony to the Chamber’s Financial Services Committee, Allaire said: “As a nation, we must make sure that the dollar is the most competitive currency on the Internet, and that there can be universal access to the safest and most secure possible digital dollars. The stakes are simply too high to ignore. ”
Despite current perceptions on cryptocurrencies used for transactions on the black market, the USDC is probably more traceable than paper money. Although there is concern Regarding the usefulness of digital currencies for money laundering, or the financing of terrorism or other criminal activities, as “criminals who use blockchains to whiten money are probably the most stupid criminals”, because “each transaction is fully traceable”.
Platforms like Coinbase require users to undergo so -called customer checks (KYC) – providing identity and social security numbers – before they can acquire USDC, and blockchain files allow the police to retrace the full history of each token. On the other hand, Cash retains its reputation for “the best way to whiten money”, in the words of Deems.
Will the circle as a stock will be a better investment than species or a USDC part?
