BlackRock and others infuse $400 million into stablecoin issuer Circle
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BlackRock joined three other firms to invest $400 million in Circle, the issuer of the second largest stablecoin (USDC). The world’s largest asset manager will also act as the primary manager of USDC reserves to help explore the stablecoin’s use in capital markets.
“It's tremendous to have Blackrock in particular put their confidence behind a critical part of the infrastructure that we think has the opportunity to be a huge part of the way the future financial and economic system works in the United States,” Jeremy Allaire, Circle’s founder and CEO, told Yahoo Finance.
Along with BlackRock, Circle’s private capital raise of $400 million comes from Fidelity Management and Research, the London-based hedge fund Marshall Wace, and fintech asset manager, Fin Capital. BlackRock was not the lead investor in this funding round.
The news comes a month after BlackRock Chairman and CEO Larry Fink wrote in a letter to shareholders that the firm was “studying digital currencies, stablecoins, and the underlying technologies.”
Unlike other crypto assets, the value of stablecoins aren’t supposed to fluctuate if properly managed. Instead, these tokens are pegged to another asset, most often the U.S. dollar.
Currently, the total circulating supply of USDC amounts to $51 billion, down by $2 billion as of the stablecoin’s February 28 attestation. According to Allaire, USDC’s reserves are composed of cash and short-duration U.S. Treasury bonds that are held in custody by BNY Mellon.
As part of this announcement, Blackrock will take a principal role in managing USDC’s reserves, which should enhance USDC’s legitimacy in the eyes of crypto-native and traditional investors alike.
While the broader partnership between the two firms could prospect a wide range of applications for USDC in traditional capital markets, Circle’s Allaire said the stablecoin could bring more efficiency to capital markets by improving transaction settlement time and finality while lowering counterparty risk.
“This is an opportunity to invest for what I really think is going to be the future plumbing of the financial system and given the role [BlackRock] plays with $11 trillion in assets under management, I think they care a lot about how the financial system is going to work in the future,” Allaire added.
As for Circle, its plans for a SPAC aren’t over, according to Allaire. While the company announced in July of last year that it would enter public markets through a special purpose acquisition company with plans to list in the fourth quarter of the year, it renegotiated the terms of the deal in mid-February, allowing it to raise private capital up to a 15% discount at a $9 billion valuation.
This “re-SPAC” as Allaire called it, is a less conventional route for companies going public through the investment vehicle. According to Allaire, Circle hopes to “de-SPAC” and list publicly in the third quarter of this year.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.
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