Jeremy Allaire is frank about the impact of the cryptocurrency market downturn on his business.
The chief executive of Circle, a Boston-based financial technology startup which bought a cryptocurrency exchange, Poloniex, for around $400 million last year, said the bear market has slackened investors’ activity on the online marketplace as well as the liveliness of the company’s over-the-counter cryptocurrency trading business, historically the firm’s biggest moneymaker.
“Well, [business] is down,” Allaire told Fortune senior writer Robert Hackett on Balancing The Ledger, Fortune’s show covering the intersection of finance and technology. “When there’s not volatility, or prices are down, then volumes are down.”
Even so, Allaire contends that Circle is weathering the market decline just fine. “We had very significant growth year last year, even though there was a crypto bear market,” he said, mentioning that the company’s revenues and customer base had grown in that time span.
Valuation?
Circle was privately valued at nearly $3 billion when it last raised venture capital funding in May in a round led by Bitmain, the Chinese cryptocurrency “mining” giant. Since then, as cryptocurrency prices plunged, and as that lead investor has faced financial troubles, reports have claimed that private shares in Circle are trading at a steep discount on secondary markets. The Block, a cryptocurrency news outlet, suggested in a recent report that Circle’s valuation had fallen to less than $1 billion.
Allaire was defiant about the notion that his company’s valuation has declined. “I can’t comment on specific transactions or specific prices or things like that, but the way that was characterized was inaccurate,” he said. Just because someone lists shares on a market, “that doesn’t mean they’re actually trading.”
Plans ahead
Circle closed its acquisition of SeedInvest, an equity crowdfunding site, earlier this month. The newly added business unit will enable the company to “get into the regulated sphere of issuing securities,” Allaire said, indicating that selling tokenized securities, or investment contracts encoded on a blockchain, will become a bigger part of Circle’s business in the near future.
“We’re going to look at ways that we can bring the benefits of digital assets, crypto technologies, and blockchains into this whole area of issuing securities over the internet,” Allaire said.
Fearless of Facebook
Circle is an issuer of USD Coin, the world’s second-most popular so-called stablecoin, or price-fixed cryptocurrency. Asked whether he felt threatened by Facebook, which reportedly has plans to debut a so-called stablecoin of its own, Allaire welcomed the competition.
“I think it’s a great sign that major Internet companies are starting to look at issuing cryptocurrencies,” Allaire said. “That’s very, very positive in our view overall.”
The stablecoin that’s going to prevail, Allaire said, is the one that uses an open standards approach. Circle’s consortium strategy, which it has pursued with partners such as Coinbase, the biggest cryptocurrency exchange in the U.S., will have an edge over rivals, he said.
This alternative approach “is ultimately going to be much more successful than a single company issuing a currency themselves,” Allaire said.
