{"id":300836,"date":"2021-07-16T17:47:00","date_gmt":"2021-07-16T14:47:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/circle-ipo-further-legitimizes-crypto-before-regulators-outsiders\/"},"modified":"2021-07-16T17:47:00","modified_gmt":"2021-07-16T14:47:00","slug":"circle-ipo-further-legitimizes-crypto-before-regulators-outsiders","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/circle-ipo-further-legitimizes-crypto-before-regulators-outsiders\/","title":{"rendered":"# Circle IPO further legitimizes crypto before regulators, outsiders"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a232626490f5\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a232626490f5\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/circle-ipo-further-legitimizes-crypto-before-regulators-outsiders\/#Onward_and_upward\" >Onward and upward<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/circle-ipo-further-legitimizes-crypto-before-regulators-outsiders\/#A_poor_time_to_tap_public_equity_markets\" >A poor time to tap public equity markets?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/circle-ipo-further-legitimizes-crypto-before-regulators-outsiders\/#Three_revenue_streams\" >Three revenue streams<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/circle-ipo-further-legitimizes-crypto-before-regulators-outsiders\/#Is_the_crypto_sector_consolidating\" >Is the crypto sector consolidating?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/circle-ipo-further-legitimizes-crypto-before-regulators-outsiders\/#Further_validation_for_stablecoins\" >Further validation for stablecoins?<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Circle IPO further legitimizes crypto before regulators, outsiders <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-128018ef>Circle\u2019s merger with Concord Acquisition Corp, a special purpose acquisition company, or SPAC, values Circle at $4.5 billion, and the combined entity is expected to debut on the New York Stock Exchange under the ticker CRCL before the end of the year.<\/p>\n<p>The merger\/offering was <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>lauded within the crypto industry. Vladimir Vishnevskiy, director and co-founder of Swiss wealth management firm St. Gotthard Fund Management AG, noted to Cointelegraph that Circle, the principal operator of USD Coin (USDC), the second-largest stablecoin by volume, \u201chas been around since 2014, and this is another example of an established player being rewarded for their input into the ecosystem.\u201d <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Onward_and_upward\"><\/span>Onward and upward<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The overall crypto market may be moving sideways lately, but Circle has clearly been moving forward, closing the gap with stablecoin market leader Tether (USDT), which in February reached an $18.5-million settlement with New York State\u2019s Attorney General for misrepresenting the degree to which USDT was backed by fiat collateral. Vishnevskiy noted, \u201cUSDC has gained market share from 14.3% to 23.5%, and now that it is going public it is highly likely that this market share will increase further, as Circle will have to disclose the assets that back this USDC stablecoin to the regulators.\u201d <\/p>\n<p>Circle is probably not harboring any surprises with regard to the assets backing its coins. As has been widely <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/bcf.princeton.edu\/wp-content\/uploads\/2021\/04\/Combined-Slides.pdf\">reported<\/a>, USDC\u2019s United States dollar reserves are attested to each month by top-five accounting services firm Grant Thornton LLP for the express purpose of ensuring that USDC is always redeemable for dollars.<\/p>\n<p>Still, some were puzzled why Circle chose the SPAC route to access public equity markets. SPACs, sometimes called blank check companies because investors give sponsors a free hand, or \u201cblank check\u201d to make mergers, are a faster way to raise capital compared with traditional IPOs, but they <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.wsj.com\/articles\/cryptocurrency-operator-circle-to-go-public-in-4-5-billion-spac-merger-11625754758\">sometimes<\/a> favor insiders at the expense of public investors, according to critics. <\/p>\n<p>Moreover, as John Griffin, who holds the James A. Elkins centennial chair in finance at the University of Texas, told Cointelegraph:<\/p>\n<blockquote><p>\u201cUtilizing a SPAC is no longer the favored route to raising capital. SPACs peaked earlier in the year, and it is becoming recognized that firms often do SPACs because they can\u2019t withstand the heavy scrutiny of an IPO.\u201d <\/p><\/blockquote>\n<p>But Circle, unlike many crypto firms, has mostly welcomed regulation \u2014 as did the crypto public offering pioneer Coinbase. So, wouldn\u2019t Circle, too, be able to survive the closer examination by regulators, analysts and institutional investors demanded in the traditional IPO roadshow process if it so chose? \u201cCircle has historically been very compliant,\u201d acknowledged Griffin, \u201cand thus it makes it more puzzling that it is taking the SPAC route.\u201d <\/p>\n<p>Owen Lau, executive director at financial service firm Oppenheimer &amp; Co. Inc., told Cointelegraph that SPACs are often favored by startups as a faster way to go public. Another attraction \u201cis the ability for the SPAC to inject capital to the company,\u201d said Lau, while David Trainer, CEO of investment research firm New Constructs, told Cointelegraph, \u201cPerhaps, the Circle folks thought that not enough people would understand their business.\u201d <\/p>\n<p>SPACs, unlike traditional IPOs, also permit companies to make earnings and revenue projections. In its investor <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.circle.com\/hubfs\/investors\/Circle-Investor-Presentation-July2021.pdf\">presentation<\/a> that accompanied Circle\u2019s IPO announcement, for instance, the firm said it expected to have had $190 billion of USDC in circulation by 2023 \u2014 up from $25 billion today \u2014 with a total transaction volume of $15 billion projected. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_poor_time_to_tap_public_equity_markets\"><\/span>A poor time to tap public equity markets?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Some have criticized the timing of the IPO. When Coinbase was listed on Nasdaq in April, crypto prices were soaring and markets were awash with liquidity. Since mid-April, however, Bitcoin (BTC) has plunged by over 50%, and many other cryptocurrencies have followed.<\/p>\n<p>\u201cWe are likely in the earlier stages of a so-called \u2018crypto-winter,\u2019 when interest in cryptocurrencies may wane over the next year-plus after the huge surge in late 2020 to early 2021. It strikes me as a bit early for Circle to [be] listing on the public markets,\u201d Lisa Ellis, senior equity analyst at MoffettNathanson Research, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bostonglobe.com\/2021\/07\/08\/business\/cryptocurrency-startup-circle-going-public-via-spac\/\">told<\/a> the Boston Globe.<\/p>\n<p>Lau disagreed, explaining that timing an IPO is important for company insiders looking to sell their shares, but over the long term, \u201cit really doesn\u2019t matter that much.\u201d The market is weighing a company over an extended period of time, and \u201cthe stock moves up and down based on the fundamentals and how well the management runs the company, not when the company goes public,\u201d he added. <\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>China\u2019s crypto industry is gone? Beijing\u2019s crackdown keeps sending shockwaves<\/em><\/strong><\/p>\n<p>\u201cCircle\u2019s timing is definitely late to the party,\u201d commented Griffin, adding, \u201cbut you can\u2019t blame them for that, no one has perfect timing. But a listing today is going to receive a tepid reception compared to what it would have been in April.\u201d<\/p>\n<p>\u201cThe timing may seem a bit off, however, this is something I am sure that was looked at by the company and its advisors when making the decision,\u201d said Vishnevskiy, who called the recent market weakness a short-term phenomenon. He added, \u201cThis is a segment of the digital asset market with little competition, and the fact that they have decided to go ahead must mean that they are confident of a successful result and achieving the valuation.\u201d <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Three_revenue_streams\"><\/span>Three revenue streams<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Circle\u2019s investor presentation identified three significant income streams. In addition to operating USDC\u2019s core market infrastructure, where it earns interest income on reserves, Circle also has a Transaction &amp; Treasury Services (TTS) segment, with clients, such as the FTX exchange, Compound Labs and Genesis, as well as a third business, SeedInvest, an equity crowdfunding platform.<\/p>\n<p>TTS, which generates transaction and usage fees, as well as income via spread capture, is the largest segment by revenue \u2014 and also the fastest growing. While USDC revenues are projected to grow fivefold \u2014 from $40 million in 2021 to $196 million in 2023 \u2014 TTS revenues are expected to balloon almost tenfold \u2014 from $65 million to $622 million \u2014 according to the company, at which time TTS revenues will be three times USDC revenues.<\/p>\n<p>Amid China\u2019s cryptocurrency crackdown, souring investor sentiment and the United States Federal Reserve chairman blasting stablecoins, there hasn\u2019t been much to cheer about on the crypto front lately, but Circle Internet Financial\u2019s initial public offering announcement in mid-July showed that a crypto startup was still capable of attracting billions of dollars in fresh investments.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-07\/3e2eb2d4-f1dd-40f2-ac20-768427c56413.png\"><\/figure>\n<p>Circle arguably then offers more revenue diversification than crypto exchange Coinbase \u2014 whose earnings are still to a large degree dependent on the price of BTC and Ether (ETH). Moreover, the Circle business model \u201clooks far more competitively advantaged than COIN,\u201d according to Trainer, because it leverages blockchain <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> to provide \u201ca seamless transition from fiat to digital currency.\u201d\u00a0<\/p>\n<p>In addition, Trainer believes that Circle \u201cis not an existing technology\/process with a blockchain veneer. It is using blockchain to improve the existing payment process and has real value to offer the world.\u201d Lau, however, wasn\u2019t ready to dismiss Coinbase. \u201cThe moat of Coinbase is quite strong due to its brand, on-ramp reputation, technological expertise, regulatory compliance and first-mover advantage,\u201d he told Cointelegraph, adding: <\/p>\n<blockquote><p>\u201cUSDC is actually developed collaboratively between Coinbase and Circle. Partly because of Coinbase\u2019s reputation and influence, USDC has gradually taken shares in the stablecoin space. Relatively speaking, there isn\u2019t much differentiation you can do with a stablecoin, but you can really differentiate yourself as an exchange.\u201d<\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"Is_the_crypto_sector_consolidating\"><\/span>Is the crypto sector consolidating?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>How should this second major crypto IPO in 2021 be viewed in industry terms? If Coinbase\u2019s direct listing was a milestone event for the crypto and blockchain sector, what can one say about Circle\u2019s IPO?<\/p>\n<p>\u201cMy first impression was that it was an \u2018aha moment,\u2019\u201d Lau told Cointelegraph. \u201cCircle didn\u2019t come across as a company that would go public imminently. It makes me believe that there are many dark horses out there that couldn\u2019t wait to go public soon.\u201d It also suggests that you don\u2019t need to be very large like Coinbase to go public, he added. Griffin took a less buoyant view: <\/p>\n<blockquote><p>\u201cThis could be a new milestone for the industry but not in a positive way. It signals the state of market decline relative to Coinbase\u2019s direct and hot listing. If the best that Circle can do is a SPAC, then this is a negative signal to other players with shakier histories that the best they can hope for is a SPAC \u2014 though many are likely too late to the SPAC-time party as well.\u201d<\/p><\/blockquote>\n<p>Still, few expected the IPO process to come undone. Imposition of new regulations on stablecoins \u2014 as per the STABLE Act \u2014 or the introduction of a major central bank digital currency could impact the future of stablecoins, suggested Lau, \u201cbut I wouldn\u2019t say they would derail the public offering\/merger. We will see how things go and keep our fingers crossed.\u201d<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Further_validation_for_stablecoins\"><\/span>Further validation for stablecoins?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>All in all, \u201cthe [crypto] market may have cooled, but there is still a lot of hot money out there, and blockchain remains a hot topic,\u201d Vishnevskiy said, while Stephen McKeon, a finance professor at the University of Oregon and a partner at Collab+Currency, told Cointelegraph, \u201cthe Circle transaction provides further validation of the market for stablecoins and, importantly, the market for services built on top of these assets.\u201d<\/p>\n<p>\u201cOverall, I would regard this event as a further legitimization of the industry in the eyes of the regulators and outside observers,\u201d summarized Vishnevskiy, adding that it is \u201csignificant considering the global regulatory crackdown and pressure we have witnessed over the last few months.\u201d<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. 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The merger\/offering was&#8230;<\/p>\n","protected":false},"author":1,"featured_media":300837,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDcvZjA5NTMyYjctZTdhZS00ZTAxLTg4ZmUtNWI4ZWE2YjU5MGM1LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[75936,75493,82350,117,5007,71278,70934],"class_list":["post-300836","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-circle","tag-stablecoin","tag-usd-coin","tag-business","tag-ipo","tag-nyse","tag-regulation"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/300836","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=300836"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/300836\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/300837"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=300836"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=300836"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=300836"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}