Goldman Sachs-backed Circle To Offer Cryptocurrency Pegged to US Dollar

The startup raises USD 110 million in an investment round, led by Chinese mining giant Bitmain.

by Marin Marinov
16 May • 3 min
In News

Circle, а digital currency payment startup backed by Goldman Sachs, has raised USD 110 million seeking to finance the launch of a cryptocurrency pegged to value of the US dollar, the company said on Wednesday. The lucrative investment round was led by Chinese crypto mining giant Bitmain.

Circle's stablecoin, dubbed USD Coin (USDC), will be backed by reserves in US dollars and is meant to tame volatility in the notoriously fluctuating cryptocurrency market, according to company co-founders Jeremy Allaire and Sean Neville. Circle’ users will be required to hold USD 1 for every USD Coin:

“A price-stable currency, such as a token pegged to the US dollar, is critical for enabling mainstream adoption of blockchain technology for payments as well as for supporting maturation in financial contracts built on smart contract platforms, such as tokenized securities, loans, and property,” Allaire and Neville explained in a blog post.

USD Coin

Circle plans to enable customers to purchase and use USDC for payments and trading within its crypto ecosystem. Currently, Circle payment system backs seven digital coins, including Bitcoin (BTC), Bitcoin Cash (BCH) and Ethereum (ETH).

USDC should be released this summer and will allow multiple developers to work on the project (the so-called open sourced blockchain). The project will be managed by Centre, a wholly owned subsidiary of Circle that should become independent after backing from more investors.

Circle's USDC will be issued as an ERC-20 token, one of the widespread token standards. ERC-20 is based on the Ethereum network and consists of a common list of rules, like how tokens are transferred and how users can access data about a token. Most of the new projects and Initial Coin Offerings (ICOs) on the Ethereum network observe the ERC-20 protocol, thus all ERC-20 tokens are compatible with each other.

five big balls

Circle and stablecoins market

Unlike many crypto companies, Circle does not rely on ICOs for funding but on venture financing. The company is well-funded because of the backing of big investors like Goldman Sachs and Chinese search engine Baidu.

Circle will face several competitors in the field of fiat-backed cryptocurrencies, or stablecoins. The largest dollar-pegged virtual currency is Tether (USDT) with competition from bitUSD (BITUSD) and NuBits (USNBT). BitEUR (BITEUR) is Euro-backed while bitCNY (BITCNY) is pegged to the Chinese Yuan. Although linked to traditional currency, fiat-backed cryptocurrencies are not government run projects, and are not connected with the so-called central bank digital coins (CBDC).