‘Going back to the roots’: Circle, Square and the path to cryptocurrency payments

Circle is staying true to its original claim that moving money should be as easy as sending email — borderless, instant and low-cost or free — even though it hasn’t really worked with bitcoin. This week, the company revealed its latest venture, USD Coin, a cryptocurrency pegged to the U.S. dollar, which is an attempt to develop a standard protocol other industry participants, ideally, will also adopt. "Circle will be the first issuer of USDC, but ultimately we want there to be multiple financial institutions that also issue various stablecoins,” or cryptocurrencies pegged to stable assets like gold or fiat currency, “so it’s all built on the same protocol,” said Divya Agarwalla, head of product at Circle. That will pave the way for “a world where you can use Square Cash to pay me on Venmo, and I can use that to send money to someone in India because it’s all built on the same standard.” The new mainstream interest in and hype about cryptoworld has made a year of "going back to the roots of actually building the projects" tied to traditional use cases of cryptocurrency, said Rachel Mayer, a senior product manager at Circle. Boston-based Circle is one of the oldest and best-funded startups in cryptocurrency. In 2015, Goldman Sachs led a $50 million funding round in the company, which is currently also raising a $110 million Series E round. It has always bucketed itself as a crypto company, but these days it identifies strongly with the up-and-coming “cryptofinance” label, Mayer said. Other companies will likely try to market themselves as such, too, as more and more and, inevitably, all finance companies begin building “on crypto technology,” she said. It’s evocative of the “fintech” portmanteau. Circle began as a bitcoin wallet and exchange in 2014 and rebranded to Circle Pay in 2015, the same year it became the first crypto company to receive a New York BitLicense. In 2016, it de-emphasized its bitcoin services further to shift focus to mobile payments. It remains widely known for the consumer-facing Circle Pay app, but it also operates Circle Trade, an OTC trading desk and liquidity provider for institutions and large investors that manages $2 billion a month in transactions. This year, it acquired cryptocurrency exchange Poloniex and launched Circle Invest, a consumer-facing competitor to Coinbase that lets retail customers invest in crypto markets. “Products have really been catered to more sophisticated prosumers and early adopters and don’t really speak the language of someone who probably just heard of bitcoin in the news,” Mayer said. "The awareness in the space is a key opportunity for us to own that moment and speak to that customer.” Circle Invest was a response by the company co-founders, who last year noticed Circle Pay accounts showing investment behavior, as well as the use of peer-to-peer transaction capability, Mayer said. It launched six weeks ago. “Circle invest really facilitates their entry to investing in these crypto assets in a straightforward, accessible way,” Mayer said. “Circle is a crypto company so our vision is that more and more assets will be tokenized and put onto the blockchain. As this space grows, consumers need a way to understand what, if anything, these crypto assets mean, what it means to invest in them, why they’re valuable and what problems they solve.” This week, Jack Dorsey, whose Square began its bitcoin foray by letting its Cash app users buy and sell it, similarly spoke about a return and refocus on bringing consumer bitcoin payments to the masses by creating a simple user experience in its existing peer-to-peer payment and trading products. Square and stock trading app Robinhood are both examples of successful consumer fintech companies increasingly becoming part of Circle competitors, which historically have included early crypto companies like Coinbase or Blockchain.com. Circle is different though because it has multiple businesses that allow the company to have “somewhat of a moat because we can leverage the other products in a way some of these other companies can’t,” Mayer said. “We have each of these four products that enable each other to grow, so we have a trade desk, and we actually get the liquidity for Circle Invest through our trade desk,” Circle Trade, Agarwalla said. “It enables us to offer competitive prices that other competitors may not be able to offer.” Yet, to be successful, all participants in the industry need to adopt the mentality “of having an open standard,” she warned. “If we have companies that don’t want the open standard and just want everyone in the room using one particular provider, it’s not going to work,” Agarwalla said. “They’re building a closed system.”