Circle Internet Financial

Circle Internet Financial announced on January 11, 2024, they silently filed a Form S-1 draft registration statement with the SEC for a proposed initial public offering of its equity securities. This is significant in the world of crypto and payments for a number of reasons:

The company’s flagship product, the United States Digital Coin (USDC) is the second most used stable coin globally. The USDC is 100% backed, 1:1, by cash and short-term government securities. The company’s more recently launched Euro Digital Coin (EURDC) works on the same principle. Circle generates transaction revenues from redeeming USDC and interest income from customer deposited currency reserves backing each USDC stable coin.

The USDC is regulated and transparent, the face value of an USDC token is always known as is the ability to convert into US dollars through the company or a crypto exchange, including into any fiat currency 24/7/365.

In our opinion, Circle answers the call for industrial strength, global, and legitimate next generation payments platform for businesses and consumers.

On a monthly volume basis the company processed $250 billion worth USDC transactions in April, off from the $300 billion all-time high in the prior month but tracking 1.5-3x better than any other two month period in the last four years.

At the end of April USDC market capitalization was $33 billion which indicates issued but unused tokens (otherwise known as value of coins in circulation). The comparatively higher April transaction value number suggests strong intra month issuance and usage trends (i.e. USDC was issued to a business or consumer and redeemed in a transaction within the same month which doesn’t impact end of month market cap).

There are many benefits to using USDC, including: fast (almost immediate) and low-cost transaction processing anywhere in the world. Cross border remittance is a natural market which is traditionally expensive on a dollar value sent basis by consumers and slow for international business-to-business transactions (may require several days). The combined service revenue opportunity is over $100 billion.

USDC is natively compatible with sixteen blockchain networks and has portability capability to other Ethereum Virtual Machine (EVM) and non-EVM chains. Circle also provides their own wallets and smart contract platform.

The US is working to clarify its regulatory crypto framework, particularly the definition of a crypto-oriented security and which agency has jurisdiction. One point of view is that Circle’s USDC fully reserved stable coin is a store of value which neither the issuer, Circle, nor the end user are able to participate in a capital gain because none exists. Another is the use case, USDC is a store of value only with industry leading transparency. It seems to us, the company should remain free of “security type” regulation.

Circle Internet Financial

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