Circle’s full-tilt pivot into stablecoins is nearly complete. 

The payments startup intends to sell SeedInvest, the crowdfunding platform it bought a year ago, and focus its remaining assets on developing stablecoin products, said Jeremy Allaire, one of Circle’s co-founders and its remaining CEO (fellow co-founder and one-time co-CEO Sean Neville stepped down last year).

As part of this process, on Tuesday the company will roll out new APIs and Circle Business Accounts, which corporate clients can use to conduct business in USDC, a token on the Ethereum blockchain designed to hold its value against the U.S. dollar.

Circle has multiple revenue streams, Allaire told CoinDesk in an interview last month. But to maximize its research and development wings, its focus since last summer has been on new products centered around the USDC token, which Circle issues. Circle is also part of the CENTRE Consortium with Coinbase, which Allaire said created the standards around stablecoin issuance. 

However, the story of Circle in recent months has been what it’s lost. In the past year, Circle has sold Poloniex, the crypto exchange it acquired in 2018; shuttered Circle Pay, its longstanding payments app; sold Circle Invest to brokerage firm Voyager; sold its Circle Trade over-the-counter desk to Kraken; and is now looking to sell SeedInvest (as The Block first reported).

SeedInvest no longer fits into what Allaire sees as Circle’s core business, he explained. The “strategic rationale for acquiring” the firm centered around Circle’s trading business. 

“We were excited about this idea of tokenization and having tokens that were issued connected to all kinds of assets,” he said. “We exited the exchange business … so the need for that set of licensing just doesn’t exist anymore. The second thing is this whole kind of tokenization, having regulated broker-dealers and tokenized securities, that’s been slow-rolled” by cautious regulators.

The company has seen its headcount similarly shrink, falling from a peak of 300 employees to roughly 125 as of January 2020, Allaire said. 

Part of the reduction comes from employees moving with their various departments as they were sold. 

“We had about 100 people who went with these different spinouts … [it was] a natural way for people to go with those businesses and product lines,” Allaire said. 

Looking ahead

Moving forward, Allaire said Circle intends to announce new stablecoin products, reiterating a view of the payment startup’s future first shared via a blog post late last year. The first wave of products included the new business accounts, which Circle hopes to offer for free to new startups, but will offer subscriptions based on usage after.

“We’ve been executing like crazy on USDC,” he said. “We’ve tokenized over $1.6 billion in USDC, crossed the $500 million market cap recently.”

Attached is the transcript of our conversation, which covers Circle’s roadmap, Allaire’s approach to investments and his views on how the regulatory landscape will shift as stablecoin use goes mainstream. It has been condensed and lightly edited for clarity.

CoinDesk: You said SeedInvest is getting spun off. Are you looking to secure a buyer or do you think it’s a company that can operate on its own?

Allaire: The way I look at it, there are a lot of strategic alternatives. [SeedInvest] is able to operate independently and can grow a lot. It’s got fundamental economics and it exists in a competitive position within the market. I think with more capital behind it, it could grow significantly.

There are a couple of ways it can do this. It could find companies that want to add something strategic to their product portfolio. It could also find financial investors that are excited about the business and want to effectively take it over, inject capital in and scale it. Of course, we’re going to look at all those options. 

Do you have a rough idea of its value right now?

Value is something that the market discovers. 

I’m pretty sure you’re on Twitter, and I’m pretty sure you’re seeing all the commentary around Circle regarding its runway. Are you confident you’ll be able to continue through 2020 or 2021 without having to make further layoffs?

I have a few things to say on that. I mean, the first is sort of obvious: We don’t disclose our financials and things like that.

Second, by undertaking changes in our approach to new businesses and products that will be meaningful in terms of revenue and value, as well as axing businesses that we don’t think are core, we’re radically improving the financial position of the company. I could say pretty definitely that we’re improving the financial position of the company. 

Circle makes small fee revenue through USDC. Do you have other revenue streams right now, or is that part of the longer-term plan?

We have multiple revenue streams but, as you know, as a private company we don’t break out exactly what those are. Some of those are revenue streams associated with prior lines of business, existing lines of business and new products we’ve publicly announced.

In early January, you published a blog post announcing a full pivot to USDC and stablecoins, and it sounds like you’re going to be announcing new products around that soon. Could you give a rough overview of what those products look like right now? 

So, just to be clear, we started working on new product development last summer and only first started publicly talking about that in January. 

There are two key buckets, products targeted at businesses, which will provide products and services to businesses rather than midmarket individuals. Those really fall into two categories. One is accounts that businesses can open. We think of these as a new type of financial account that any business that wants to can use, store, custody, make payments with, and automate the use of stablecoins, can use those account services from us. 

This is all stablecoin-native and accessible in 150 countries with integrations with the banking system. The really critical thing is what a business can do with these products. To that end, we’re introducing a new set of platform APIs. You can think of it as a platform-as-a-service or banking-as-a-service model for developers that want to build infrastructure to integrate stablecoins into payments, commerce, finance, or any programmable money use case.

I know Coinbase is also part of the CENTRE consortium. Can you speak to their involvement in all this, or is Circle operating independently of CENTRE? 

So the CENTRE consortium is a standards and governance body for stablecoins. The first stablecoin from the CENTRE Consortium is USDC. We’ve publicly conveyed together with Coinbase through CENTRE that there’s a roadmap to add additional currencies and blockchains to support those stablecoins. The consortium will set the standards and governance model for those, meaning it governs how reserves are managed and the compliance policies to be a vendor or issuer of a stablecoin. 

It’s a bit like what VISA did originally. VISA was a nonprofit organization of member banks. Rather than having each bank set their own standards and issue their own plastic cards that could only be used by businesses and consumers that work with a specific bank, they created a set of interoperable standards so it didn’t matter [whom] you banked with. And it created a governance framework for compliance and liability. 

We think these types of cooperatives will be really critical to the mainstream adoption of stablecoins. And that when regulators and policymakers set standards for stablecoin issuing, they will lean a lot on consortiums like this to be at the frontline of regulation and issuance. We imagine a world with tons and tons of different competing stablecoins, but a limited number of consortiums with standards and interoperability. CENTRE is the only live consortium model in the entire market. The Libra Association is a proposal to do something similar, but the Libra model has its own proprietary blockchain while CENTRE is designed to work with existing, public, open blockchains. 

There is no relationship to these businesses that Circle is building. As a member [Circle] is able to issue and offer USD through their brokerage and exchange product. Circle can build whatever services it sees fit. 

Again to bring up VISA: It’s a network consortium model made up of banks that all still compete with one another. There’s retail banks. There’s commercial banks. There’s merchant banks. There are all these financial institutions that plug into this standard infrastructure. In a similar way, in the world of stablecoins, you’re going to have business-to-business focus, retail-focused products and services, and you’re going to have payments versus trading. There’s a lot of different use cases. And that’s sort of the relationship of CENTRE to this.

Switching gears, it looks like regulators have been slow-rolling broker-dealer licenses. How has the regulatory outlook changed in the last couple of months? 

Well, I would say one area that I’m seeing a really significant change is around stablecoins, specifically. I think policymakers and regulators are hyper-focused on this right now, because of what’s happening organically in the market with things like USDC and because of the Libra network proposal.

There’s a very high-level engagement in Congress, in central banks and among financial regulators. Just yesterday there were public comments from the chair of the G-20 finance ministers saying they are going to work on a specific set of regulatory policies on stablecoins as early as April, which could be finalized at the G-20 Summit in September. 

If you want to have this be really the future payments of commerce and really believe this could be used broadly in mainstream business, you need the rules of the road to be laid down. It’s about making businesses and consumers feel safe to participate. 

Would you say there has been a real shift in how domestic regulators are approaching U.S. dollar stablecoins?

Like I said just now, I think major national regulators in the U.S. and in other jurisdictions are trying to formulate what will ultimately become new guidance or specific policy recommendations. Some of which might need to be enacted by Congress, others that could become public guidelines. But I think that there’s gonna be changes there. 

Right now, there’s a self-regulatory organization around stablecoins through the CENTRE consortium, making it the only stablecoin with a robust self-regulatory scheme around it. The only members of CENTRE that can issue USDC are all fully regulated in the United States as money transmission companies or trust-bank companies. We maintain the proper licenses. We go through examinations. We notify regulators of what we’re doing with these products. That includes state banking regulators throughout the United States, as well as the Treasury Department’s Financial Crimes Enforcement Network, FinCEN. 

But, because stablecoins are likely to take on a bigger role in the financial system in the coming years, you’re likely to see a policy shift from just the state level to a national focus. 

I know you guys put out attestations about stablecoins reserves but don’t on the banking relationship side. Have you had any issues, or have you seen any kind of change in how banks approach storing reserves for stablecoins?

I can’t speak on behalf of other stablecoins but at CENTRE we’ve seen really robust demand from significant banking institutions to get involved in reserve banking stablecoin clients. That’s not just here, but in international markets as well. 

Will you continue investing in other companies in 2020? 

That’s a good question. I’ve built two publicly traded companies, through a mixture of investment and M&A. Circle itself has done some M&A and we’ve obviously done some divestitures as well. When you build out a company you’re constantly looking at what are you best suited to build? Are there things that you could invest in or acquire? We’ll continue to look at that as we build out, but it’s not like a specific strategy that we’re gonna do this or that in 2021.

Going a little off the reservation here: When you set up a bank account for Circle’s new products, whose name actually appears on the account: Is it CENTRE, Circle or the entity holding the account? 

The way it works is, CENTRE appoints reserve banks, issuers of USDC must be able to onboard with those reserve banks and each member issuer holds an account with those banks. The U.S. dollar reserves are rebalanced between the different issuers and accounts on a daily basis, but the accounts themselves are held by each consortium member. 

I can’t imagine the banks have seen that before. 

There are lots of analogies in market structure in financial markets.