Circle deploys $1 billion to compete in the stablecoins market

Circle is counting on a $1 billion cushion to weather competition in the stablecoins market. This was stated by the head of the USD Coin (USDC) issuer, Jeremy Allaire, to Bloomberg.

Since the start of the year, Circle’s market capitalization has fallen from $44.5 billion to $26.2 billion. The main competitor’s figure — USDT from Tether — rose to $83.4 billion.

Allaire acknowledged that the decline in market share was partly linked to Binance’s decision about a year ago to stop using USDC in favour of its own stablecoin. The Circle CEO also noted the tail-risk factor of other events.

“Collapse of Terra helped us, and Binance’s forced conversion hurt. Collapse of FTX seemed to be a plus, but then regional bank failures harmed,” said Allaire.

Circle earns most of its revenue from interest on USDC collateral, such as short-term Treasuries or dollar-denominated deposits. For the first half of the year, the company’s revenue totaled $779 million, while for all of 2022 it was $772 million. During the period the firm posted a profit of $219 million and ended with more than $1 billion in cash on its balance sheet.

“This is significantly more than we expected, and it enables a multitude of opportunities for investing, creating new products, monetising revenue streams and pursuing international expansion,” emphasised Allaire.

In his view, competition in the market of stablecoins will grow as more entrants come to it. The appearance of PYUSD from PayPal is just the beginning, the Circle chief said with confidence.

The issuer of the stablecoin for the payments giant was the infrastructure blockchain company Paxos. According to its spokesperson, the firm is working on partnerships with many players in technology and finance who are ready to follow PayPal’s lead.

Analysts at Bernstein estimate that, over the next five years, the stablecoin market capitalization will grow from $125 billion to $2.8 trillion.