China’s biggest bitcoin mining company has led a $110m investment in Circle Internet Financial that values the fast-growing US mobile payments and cryptocurrency trading company at close to $3bn.
The funding round, led by China’s Bitmain, propels Circle into the top tier of cryptocurrency companies by funds raised and brings together two of the nascent sector’s leading companies from the world’s two largest economies.
Circle uses the blockchain technology that underpins bitcoin to provide peer-to-peer payment services, but also offers over-the-counter cryptocurrency trading.
The investment comes as Circle launches a new type of token — a “stablecoin” — backed by fiat currency reserves at a central bank in an attempt to overcome the volatility that has hampered efforts to use cryptocurrencies as a mainstream method of payments.
“We are creating a stablecoin, the USD Coin, backed by fiat currency reserves,” said Jeremy Allaire, the internet entrepreneur who co-founded Circle in 2013 and whose previous ventures include the online video platform Brightcove.
“You can’t transmit dollars over the internet, or use them in smart contracts,” said Mr Allaire, referring to self-executing transactions on blockchain technology. “The ability to send a digital currency to anyone with a digital wallet is revolutionary, opening up the world to totally new forms of commerce.”
Bitmain, which is based in Beijing but has offices in other cities including Amsterdam, Tel Aviv and Hong Kong, claims to be the world’s largest provider of high-powered computer servers used for “mining” cryptocurrencies such as bitcoin and Ethereum.
Miners create new cryptocurrencies by solving complex maths problems to validate new transactions. The reliance on raw computing power makes the energy-hungry process more akin to industrial manufacturing than traditional high-technology businesses.
China has recently started clamping down on cryptocurrency mining companies, as well as bitcoin exchanges and token issues for initial coin offerings. Bitmain has been expanding its operations outside China and has plans to open US bitcoin mining centres.
Circle said Bitmain would help it to introduce other “stablecoins” — backed by different fiat currencies — and to help them become interoperable around the world.
Some cryptocurrencies have been tied to cash deposits before, such as Tether, which is linked to US dollar deposits. But Tether has faced scepticism about the opaqueness of those reserves, which Mr Allaire said Circle would address by being more transparent.
Mr Allaire said Circle turned cash-flow positive for the first time last year. It handled more than $75bn of cryptocurrency transactions between December and February, generating $250m of revenue, he said. Its user base has grown almost fivefold to 7m in more than 200 countries in the past year.
The Boston-based company provides cryptocurrency investment and trading services, as well as a free payments service for people to send US dollars, pounds sterling and euros across borders. Earlier this year it acquired Poloniex, the US cryptocurrency exchange, in a deal reportedly worth $400m.
It plans to expand from 230 staff to more than 400 by the end of the year and already has offices in New York, San Francisco, Dublin, London, Paris, Madrid, Milan, Beijing and Hong Kong.
The latest funding round takes the total raised by Circle to more than $240m. Existing investors putting in fresh money include IDG Capital, Breyer Capital, General Catalyst, Accel, Digital Currency Group and Pantera, while Blockchain Capital and Tusk Ventures have become new investors. Goldman Sachs has previously invested in Circle but was not part of the latest round.
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