By Karoliina Liimatainen on Tuesday 29 May 2018
Freshly valued at $3bn, crypto finance company Circle tries to build infrastructure for what it calls the new global economy. “It was not happening, so someone had to start doing it.”
Crypto finance company Circle has a humongous task ahead of it – building infrastructure for a new type of world economy where all transactions and contracts are tokenised. Marieke Flament, the managing director of Circle’s European operations, said in an interview with AltFi that, originally, the company didn’t intend to take on that mission.
“We’re getting more and more involved in creating the infrastructure for the entire crypto ecosystem. Is it something that we planned to do? No. But it was not happening, so someone had to start doing it.”
Boston-based Circle, established in 2013, has come a long way from being just another payments company competing with the likes of PayPal’s Venmo.
Its portfolio of products now includes blockchain-based payment app Circle Pay, an investing app Circle Invest for retail customers who don’t necessarily know much about cryptocurrencies and Circle Trade, an over-the-counter crypto trading service for institutional investors. Recently, Circle also bought one of the world’s largest cryptocurrency exchanges Poloniex for $400m.
“Circle’s goal is to enable people to share and create value seamlessly on the blockchain. What we believe is happening, is the tokenisation of everything. This is the overarching theme for what we do at Circle,” Flament said.
An important part of Circle’s “new world economy” is issuing stable crypto assets that are practical and trustworthy in everyday transactions. That’s why the founders, Sean Neville and Jeremy Allaire, announced earlier this month that Circle would issue a cryptocurrency called Circle USD Coin. USDC is a “stablecoin” backed by the US dollar, the most trusted fiat currency in the world.
“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”, the duo explained in a blog post.
Circle’s USDC is meant to be one stablecoin among many others. The company’s bigger undertaking is setting up Centre, an open source network for issuing other crypto assets with stable prices and transparent regulation. All developers that wish to participate in the network will be audited and licensed. Right now, Centre is Circle’s subsidiary but later it will operate independently.
“Some of the players taking part in Centre are ultimately going to become our competitors. But that’s why we’re setting up Centre as an external foundation as something different from Circle. There is a need to have a place where the ecosystem can thrive,” Flament explained.
One of the organisations about to join Centre is Bitmain, a Chinese bitcoin mining company, which led the recent $110m investment round into Circle. Flament is tight-lipped about other possible Centre members but says there has been a huge amount of interest.
“When we announced our stablecoin and Centre at Consensus 2018, people were standing up. That’s not something you often see at a conference. There is clearly a need in the ecosystem for someone to step forward.”
The idea is to provide full transparency and create public trust in the crypto assets.
“For the whole crypto ecosystem to work, we need stability and a system that can be easily understood. That is why pegging tokens to fiat currencies is important. For each of our USD Coin, there exists a US dollar in a bank fully auditable and traceable and in compliance with the regulation.”
For some, Circle’s approach goes directly against the original idea of the first blockchain-based cryptocurrency, Bitcoin. Bitcoin was supposed to a new type of money, free from the control of government authorities like central banks. Yet, now Circle is saying that pegging crypto assets to the traditional monetary system is the best solution.
Flament is aware of the ideological conflict but believes Circle to be on the right side of the argument.
“Some schools of thought might be for more decentralisation and think that that you don’t need the government, banks or any of that. For me, it’s very utopian to think that way.”
She sees dollars, pounds and euros as something that people trust and can relate to. Meanwhile, cryptocurrencies have a reputation for being extremely volatile and vulnerable to price manipulation, and many ICOs (initial coin offerings) have turned out to be fraudulent.
“Decentralisation has a lot of power, but that doesn’t mean that regulation shouldn’t exist. Our goal is to find out how new technologies like blockchain can be leveraged to push innovation in compliance with the regulation in a way that protects the consumer.”
Circle is not the first company to peg its crypto asset to a fiat currency but, so far, the transparency has been lacking. For example, Tether, another crypto company, claims its tokens are backed by US dollar reserves but it has not been properly audited and authorities have expressed suspicions about its finances.
With rampant speculation and fraudsters abound in the crypto world, Circle has to be immaculate if it wants to win the trust of the public. But what would Circle’s “tokenised world” even look like?
“The first thing that was tokenised was money, and bitcoin was the first crypto asset to enable that. But now we’re starting to see tokens that are securities, goods, contracts and so on. For example, your ownership of a car or a flat is a contract, which can be made into a smart contract, which again can be exchanged on the blockchain,” Flament said.
The luxury industry is already using blockchain-based solutions to track and identify their products. Another example Flament likes to use, is an expensive artwork.
“You cannot afford to buy the whole thing, but you could buy a small part of it. The pieces of that artwork could be tokenised, put into smart contracts and exchanged on the blockchain.”
In the ideal world of Circle, any kind of ownership could be broken into little pieces, like a joint-stock company. People would have full control over everything they own, whether it’s their property, talent or time, and they could exchange it directly on a decentralised blockchain without middlemen snatching fees. Secure trading would be available for everyone cheaply and quickly.
Right now, the crypto space is a fragmented Wild West. Does Flament really believe that all transactions in the economy could eventually be tokenised?
“In theory, they could be. There are always questions about how fast and widely this will happen. But we’re talking about adding a new layer of intelligence to the internet. It will enable us to send and receive any kind of value and give us irrefutable proof of our ownership. The power of that vision, when you start understanding it, is mind-blowing.”
Flament is a French-born computer engineer who has worked in a diverse range of companies from the luxury giant LVMH of Louis Vuitton fame to Boston Consulting Group. At her previous job at Expedia’s Hotels.com, she was in charge of Europe, Middle East and Africa Region.
When a headhunter approached her about a role in Circle three years ago, she was surprised. She knew very little about cryptocurrencies, and what she had heard was mostly bad publicity.
“But then I started reading more about blockchain, met the founders Sean and Jeremy, and I was completely blown away. I was quite shocked that, as someone with an engineering background, I hadn’t heard about that technology. The transformative power that blockchain will have on the economies will be fundamental.”