- Digital currency platform announces deal to go public…
- Announcement comes amid increased scrutiny on stablecoin industry…
- CEO optimistic about future of USD Coin…
Two hot worlds are colliding: digital currencies and SPACs.
The deal would value the company at $4.5 billion and is supported by more than $1.1 billion in capital.
“Investors have committed $415 million in PIPE financing, which when combined with cash in trust and Circle’s recently closed convertible note financing will provide Circle with over $1.1 billion in gross proceeds upon the close of the transaction.”
$CND went public via an IPO in December 2020 intending to choose a merger that would “capitalize on the ability of its management team and sponsor to identify, acquire and manage a business in the financial services and financial technology sectors, including payments, enterprise software, and data analytics.”
Circle CEO Jeremy Allaire will maintain his position with the company upon completion of the deal while Concord’s Chairman Bob Diamond will join the board.
Allaire said, “through this strategic transaction and ultimate public debut, we are taking an even bigger step forward, with the capital and relationships needed to build a global-scale internet financial services company that can help businesses everywhere to connect into a more open, inclusive and effective global economic system.”
Circle is an eight-year-old startup best known for co-creating the stablecoin USD Coin or USDC in 2018.
The company describes itself as “a global financial technology firm that enables businesses of all sizes to harness the power of digital currencies and public blockchains for payments, commerce and financial applications worldwide.”
It says USDC “has become the fastest growing, regulated, fully reserved dollar digital currency” with more than $25 billion worth of the coins in circulation.
Stablecoins are meant to be less volatile than cryptocurrencies by pegging their market value to an asset like the U.S. dollar.
But today’s merger announcement comes as regulators have recently put the stablecoin industry under a microscope.
A group of Democrat Representatives introduced the Stablecoin Tethering and Bank Licensing Enforcement Act, or the STABLE Act, in December 2020.
Reps Rashida Tlaib, Jesus Garcia, and Stephen Lynch say the legislation “would protect consumers from the risks posed by emerging digital payment instruments… by regulating their issuance and related commercial activities.”
The changes proposed in the legislation include:
- Require any prospective issuer of a stablecoin to obtain a banking charter
- Require that any company offering stablecoin services must follow the appropriate banking regulations under the existing regulatory jurisdictions
- Require that any company or bank issuing a stablecoin to notify and obtain approval from the Fed, the FDIC, and the appropriate banking agency 6 months prior to its issuance and maintain an ongoing analysis of potential systemic impacts and risks
- And require that any stablecoin issuers obtain FDIC insurance or otherwise maintain reserves at the Federal Reserve to ensure that all stablecoins can be readily converted into United States dollars, on demand
The stablecoin space also got a lot of attention with the collapse of TITAN in mid-June, with billionaire Mark Cuban calling for more regulation after being hit by the rout.
Even with the increased focus of regulators, stablecoins look poised for a strong future.
Allaire compared the payment system to giants like Visa or Mastercard.
In an interview today he told CNBC, “We operate this market infrastructure of USDC which doesn’t have a clear comparable. It’s a fundamental innovation in payment systems, so you might think about large payment technology companies.”
In March, Visa became the first major payments network to settle a transaction using the USD Coin.
“Support for digital currencies as a new type of settlement currency marks an important step forward for Visa’s network of networks strategy, which is designed to enhance all forms of money movement, whether on the Visa network, or beyond.”
That transaction is seen as one step forward in laying the groundwork to support a digital dollar in the future.
In January, Circle added ACH (Automated Clearing House) support for its customers, enabling them to “offer seamless bank transfers to and from USDC.”
Circle says, “ACH payments automatically settle as USDC in your Circle Account, and payouts enable automatic conversion from USDC into ACH transfers.”
The system creates a seamless way to convert USDC into USD.
Allaire said, “we’re building this suite of what we call transaction and treasury services – those look more similar to at-scale, financial services platforms. It’s a diversified set of businesses.”
The SPAC merger with Concord is expected to close in Q4 2021 but it’s unclear what the emerging company will be called or which ticker it will trade under.
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