Circle transformation: from Goldman Sachs, Baidu sought after, to give up bitcoin payment and change to stable currency

Founded for 6 years, Circle is a well-deserved star blockchain project – known as "US version of Alipay", which has been favored by Goldman Sachs, Baidu, and Bitland. It has completed 5 rounds of financing, with a total financing of more than 250 million, and a peak valuation of 30. One hundred million U.S. dollars.

But the road to the development of Circle is not always smooth.

On October 3rd and 4th, Circle issued a total of about 50 million USD stabilized USDC to the Ethereum network within two days. Counting the previous number, Circle issued nearly 130 million in two months. USDC, equivalent to RMB worth nearly 1 billion yuan.

In addition to the frequent issuance of USDC, this year, Circle has transferred part of its operations to Bermuda and shut down its Circle Pay and Circle Research services. The Circle, which originally had to be a "payment business" and a "realistic virtual world bridge", now has a layout exchange and is more inclined to the cryptocurrency trading industry chain.

From payment to exchanges, can the transitioned Circle continue to gain the favor of regulation, capital and users?

"US version of Alipay"

The former Circle has the reputation of “US version of Alipay”.

In 2013, Jeremy Allaire founded Circle, based in Boston, initially targeting “consumer finance companies” to create a bitcoin payment and transfer platform.

“When users need to transfer funds, they only need to buy Bitcoin for a short period of time, and they can transfer funds such as US dollars or British pounds in the linked accounts to other accounts.” Some insiders describe their business.

For a simple example, before the international transfer needs to wait for the bank, SWIFT 3-5 working days to confirm, but using Circle, you can achieve "cash – bitcoin – cash", fast transfer.

According to the Muggle, before the founding of Circle, Jeremy also founded an online video platform Brightcove, and successfully listed on the NASDAQ. Therefore, out of trust in Jeremy, Brightcove's investors decided to continue to support Jeremy and gave him $9 million in Series A financing.

This financing, "created the highest financing amount in the history of cryptocurrency companies at the time."

Circle is full of enthusiasm. At the moment when the outside world is still arguing and discussing the concept of bitcoin and blockchain, it continues to be favored by well-known venture capital institutions such as Goldman Sachs, and has gained high recognition from regulatory agencies.

In August 2015, Circle received $70 million in financing from Goldman Sachs Group and IDG Capital; in September, Circle received the first digital currency license, BitLicense, from the New York Financial Services Authority, which means that Circle is available in New York State. Licensed to provide digital currency services.

After that, Circle slowly entered the vision of a wider group of people.

After obtaining the license, Circle announced that its Bitcoin application Circle Pay can support people to conduct bitcoin trading and transfer transactions. There is no handling fee during the transfer process. Users can recharge US dollars in the Circle account by binding Visa and MasterCard. .

By the end of 2015, Circle had created Circle Pay into a social software, similar to the current WeChat, which also laid the groundwork for Circle's first transformation.

Circle Pay interface screenshot (Source network)

2016 is a year in which Circle has triumphed.

In April, Circle received an electronic payment license from the UK Financial Services Authority, which is the first time a UK regulator has licensed a company that operates a cryptocurrency and digital asset business, meaning that the UK and even the entire EU region have opened the door to Circle. ;

In June, Circle completed the key D round of financing. The financing raised 60 million US dollars, IDG led the investment, and a number of Chinese companies participated, Baidu, Everbright, Yixin, Zhongjin Jiazi and many other Chinese companies have followed suit.

With the overweight of Chinese companies, Circle then expanded its business to China and established Circle China. TechCrunch's previous article shows that this may be the measure taken by Chinese companies (Baidu-led) to try to compete with Tencent and Alipay.

In September 2016, Apple's IOS 10 iMessage supports users to use SMS to transfer money such as US dollars and Bitcoin, and the service involving Bitcoin transfer is provided by Circle.

According to 36Kr's previous article, in 2016, Circle handled more than $1 billion in transactions, and the annual user growth rate exceeded 1000%.

This is the first phase of Circle's development: centering on the Bitcoin trading business. At this point, Circle and Bitcoin transactions are equated, "it is a formal exchange."

At the end of 2016, the dispute over bitcoin forks and expansions has intensified. The bitcoin with a cap of 21 million is obviously unable to satisfy the growing trading volume of Circle. “Three years have passed, and the development of Bitcoin has slowed down a lot.” Jeremy said in an interview earlier.

Seeing the defect of Bitcoin as a payment instrument, Circle announced on December 7, 2016 that “abandoning the Bitcoin business”, retaining the transfer of bitcoin and US dollars and other legal currency, but users can not buy and sell bitcoin, want to carry out bitcoin Users who buy, sell, etc. will be "directed to Coinbase."

Perhaps it was to see that social payment in China was very prosperous at the time, and Jeremy once again mentioned “social payment” and said that “Circle will shift its business focus to social payment”.

However, Circle's next layout is a thousand miles away from the "social payment" slogan. Circle is eager to trade in cryptocurrency exchanges.

"Wall Street Financial Giants"?

In the field of blockchain and cryptocurrency, the "most profitable" is the exchange–the key to the second stage of Circle's development.

In October 2017, Circle launched “Circle Trade” to provide cryptocurrency over-the-counter transactions. As of February 2018, Circle Trade handles $2 billion worth of transactions per month.

“Jeremia has played down the role of Bitcoin (payments) in the Circle business and started doing more work on making money.” Coindesk concluded after talking to Jeremy.

At the end of February 2018, Reuters news that Circle spent $400 million to acquire the US digital currency exchange Poloniex (hereafter referred to as P network). The news caused an uproar in the market at the time. According to previous articles in the Planetary Daily, the acquisition was completed as early as 2017.

According to the Muggle (block: muggle_block), at the time, most mainstream media were very optimistic about the Circle initiative.

Fortune magazine has written a special feature of Circle, which states that Circle has received more than $100 million in financing. The over-the-counter trading platform Circle Trade has a monthly volume of up to $2 billion, and regulators in the US and the UK. Open to the green light, mainstream capital such as IDG is also continuing to increase, business expansion to the Chinese market, coupled with the customers available after the acquisition of P network, Circle may become a "Wall Street financial giant."

The market, capital, supervision, and users are the only ones who love the Circle, the world and the people.

There are also some people who are more concerned about the impact of Circle's acquisition of P-network. For example, can the P network become a licensed digital currency exchange with Circle's BitLicense? After Circle's legal currency channel was provided to the P network, the regular army on Wall Street had a channel for investing in digital currency.

In the speculation of professionals, there is a faint concern about the P-network itself. Because the early P network has been criticized, users complain that their deposits are missing, accounts are frequently locked, and funds are difficult to withdraw. Even Twitter users ridiculed it as an international mafia.

Twitter User Reviews

In addition to the acquisition of the P network into the exchange track, Circle also took a fancy to the stable currency market.

In July 2018, two months after receiving a $110 million investment in Bitland, Circle and Bittland launched the USDC, which stabilizes the dollar.

According to public data, as of now, there are about 476 million ERC 20 USDCs circulating on the Ethereum network. The online exchanges include Coinbase, OKEx, Poloniex, Kucoin and so on.

In addition, Circle's layout extends to all aspects related to cryptocurrencies. In October 2018, Circle acquired SeedInvest, a equity crowdfunding platform, to establish the Circle Reseach platform to provide cryptocurrency industry news and reports.

At that time, Circle became a company offering diversified cryptocurrency business. Its business scope mainly includes six types: Circle Pay helps customers to transfer money freely; SeedInvest is used to raise funds; Circle Trade provides over-the-counter trading services; and Poloniex exchange offers different The cryptocurrency transaction; USDC is the stable currency issued by Circle.

From "US version of Alipay" to "Future Wall Street financial giants", Circle has become the shining star in the blockchain business. However, at this moment of expansion and transformation, Circle development encountered problems.

Layoffs, violations, company valuations plummeted

According to the Muggle (block: muggle_block) statistics, Circle's problem first appeared in the changes in its company valuation.

In February 2019, the cointelegraph Japan article pointed out that on the SharesPost stock exchange platform, Circle was valued at $705 million. In May 2018, Circle earned a value of $3 billion when it received a $110 million investment from Bitco. In just nine months, Circle's valuation fell by three-quarters.

In May, an article in Coindesk showed that Circle had laid off 30 people, about 10% of the total number of employees, and then went on to three more executives.

At the same time, after the acquisition of the P network, the relationship between Circle and regulation has become tense.

On May 13, 2019, PNet announced that it would remove nine types of cryptocurrencies from US users' pages. Because according to US law, these tokens are close to the concept of securities, but they are not registered in the SEC, there is a risk of violation.

As one of Circle's business focus, the P network, as a cryptocurrency exchange, its profit source is the project side's foreign currency fee and the handling fee generated by the user's transaction, while the lower limit of multiple cryptocurrencies is undoubtedly a P network. Not a small blow.

Perhaps because of the frustration of P-network business, Jeremy, the CEO of Circle, began to express public dissatisfaction with the existing cryptocurrency regulatory policies in the United States.

On May 20 this year, Jeremy updated a blog that had not been updated for four years and sent an article entitled "The United States needs to reform the cryptocurrency policy." The article called for Congress to enact a cryptocurrency-related bill:

We are initiating a legitimate appeal for encrypted numbers to Congress, and we are taking the fight for crypto to Congress! We are taking the fight for crypto to Congress! We are taking the crypto fight to policymakers globally.

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Part of the Circle website screenshot

On July 30th, when he was invited to participate in the US Senate Banking Committee hearing on the theme of “Reviewing the regulatory framework for digital currency and blockchain”, Jeremy also repeatedly mentioned the lack of transparent and open supervision of the cryptocurrency industry in the United States. Measures.

The results of uncertainties and restrictive regulatory environments have led many digital asset projects and companies to register outside the United States and prevent US individuals and businesses from accessing related products and technologies;

The United States should not use the law of 100 years ago to regulate 21st century technology;

Regulators should develop specific rules rather than incorporating encryption into the regulation of the existing financial system.

The company's valuation has fallen sharply, business has been frustrated, and talent has been lost. It is undeniable that the cryptocurrency cycle is one of the factors, but as a star project that has been sought after by countless people, Circle needs to find a new direction.

Cut off the payment, "escape" the United States

According to data from DAppTotal.com, from August 6 to October 4, in just two months, Circle has issued USDC four times on the Ethereum network, amounting to approximately 130 million pieces, while Jerry Mi also said that he would focus more on the USDC and “establishing a free, open and transparent global payment network”.

Circle opened the third stage. Circle will re-transform around the USDC business in the future, and this can be divided into three directions:

First, cut off social payments, publishing research reports and other services.

In June of this year, Circle announced that it would gradually cancel its support for its social payment application Circle Pay, and finally canceled its support for this business on September 30th. The Finance Magnates article pointed out that the beginning of cutting off the initial payment business "marked a significant shift in the direction of the Circle product."

On September 25th, Circle published an article on its official website stating that the Circle Research project will be suspended. Circle official said that “although we have made significant progress in content delivery, it is time to evaluate our contribution and overall strategy”.

Second, transfer the P network business operations main body, "wandering" Bermuda.

Jeremy has said that 70% of P-network users come from outside the United States, and the US SEC can easily define cryptocurrency as securities. Therefore, many cryptocurrencies on P-net face the risk of being unreviewable. The business entity moved to Bermuda, where the regulatory environment is more relaxed.

On July 23 this year, Circle announced that P Network will obtain a license for the Bermuda Digital Assets Business License.

According to public information, the Bermuda Region passed the Digital Assets Business Act (DABA) in 2018, providing a comprehensive framework for the cryptocurrency industry. Circle also announced that it was the first major crypto-finance company to receive Bermuda's F-class (all) DABA license, which also allowed Circle to provide payment, custody, trading and other financial services using digital assets.

The Muggle Party (ID: muggle_block) found that the response from the market was also very positive. Most users did not care about the transfer of P-network or Circle main business, but expressed understanding and support.

Twitter User Reviews

Third, announce the restart of Trollbox.

On June 18, 2019, Jeremy announced on Twitter that he would re-enable the Trollbox service that P network had closed.

According to Muggle (block: muggle_block), Trollbox can be traced back to 2016. This is the cryptocurrency social platform launched by P.com, where people can chat in real time and exchange internal news and transaction information.

However, the P network shut down Trollbox in June 2017 on the grounds of “reducing speculation on how the exchange handles user funds” because users on the Trollbox will also discuss negative information about the P network, such as freezing user accounts.

This unilateral shutdown is not accepted by users. Until now, there are still users who accuse the P network. They think that "the P network has a very good Trollbox. After the Trollbox is closed, it has been falling all the way." "There are those with Trollbox." Year is very interesting."

Now Circle decides to restart Trollbox, on the one hand because of previous experience of socializing, and on the other hand, to build customers through social networking.

Twitter users highly praise Trollbox

Cut off the early social payment business, "abandon the car to protect the handsome"; transfer the main body of the exchange to Bermuda, and withdraw in time; restart Trollbox, it is a longer-term plan. Today's Circle is no longer an "Alipay" or "Financial Giant", but a farther and farther away on the cryptocurrency track.

In addition, it is worth noting that although Jeremy frequently accused the United States of the cryptocurrency regulatory environment is not friendly, Circle has not given up to cater to US regulation.

In April of this year, SeedInvest, an equity crowdfunding platform previously acquired by Circle, received an Alternative Trading System (ATS) license from the US Financial Industry Regulatory Authority (FINRA). SeedInvest is also the first equity crowdfunding platform to receive FINRA approval to operate the secondary trading market.

This also means that even with the intention of "escape" from the United States, Circle still does not give up, and hopes to help achieve token securitization through the compliance of equity crowdfunding platform, which makes financing more convenient. At the time, the Circle spokesman also said, "This is an important step in realizing the vision of tokenized securities."

After a series of adjustments and reforms, can Circle's future be stable?

Is Bitcoin payment a "pseudo-demand"?

In May of this year, The Block quoted people familiar with the matter as saying that Circle is seeking $150 million in financing. The current financing progress is not known to the outside world.

But what is certain is that Circle's future path is still full of challenges.

The most immediate challenge remains regulation. Today, the United States has a certain framework for the regulation of cryptocurrencies and digital assets, and it is more detailed and in-depth. Circle wants to develop in the United States, must learn the Coinbase approach, closely contact and obey the supervision.

Otherwise, Tether is a forerunner – recently Tether has not only caught up with the legal disputes with the US Attorney General's Office in New York, but also faced a class action crisis and was asked to compensate investors $1.4 trillion.

Second, after the transition, Circle's development focus will be placed on the USDC, but this must face the problem of competing with other stable currencies such as USDT.

As of now, the ERC20 USDC on the Ethereum network totals approximately 476 million. According to Blockchain.com's stable currency report released in February 2019, USDT accounted for 2/3 (about 67%) of the stable currency market. USDC is only second only to USDT, but its share is only about 9%. . How to break through and occupy more market share is the challenge of USDC.

Image source: Blockchain.com

Once again, even if Circle removes the business entity from Bermuda, where the regulatory environment is more relaxed and transparent, it does not mean “absolute security”.

In order to avoid the strict regulatory environment in the United States, Facebook has set up its main body of digital currency project Libra in Switzerland. But last month, Switzerland suddenly “faces” and said it would take “strict regulatory measures” against Libra.

Will the transfer of business entities to Bermuda's Circle for the same purpose be subject to “betrayal” by Bermuda's regulators? These questions deserve to be seriously considered by Circle.

From the course of Circle, Muggle has drawn two conclusions: First, the most popular thing about cryptocurrency startups is the exchange business; second, cryptocurrency payments are not good.

When Goldman Sachs and Baidu invested, the business direction of Circle was bitcoin payment; after the problem of bitcoin payment, Circle proposed “social payment”, and now the social payment Circle Pay business has been cut down.

The cryptocurrency payment is not good. On the one hand, the bitcoin payment market is small. The biggest value of Bitcoin itself is investment and value preservation. Most people don't spend bitcoin to buy daily necessities. On the other hand, the electronic payment industry is basically mature. For example, Alipay has also accessed blockchain technology and developed nine e-wallets in the Southeast Asian market.

Nowadays, it is the stable currency to temporarily take over the task of “communicating reality and virtual world”. Where will the future of Circle go, we will continue to pay attention.

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Source / Muggle Pie (ID: muggle_block)

Original article, unauthorized reproduction is prohibited.

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