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Circle SPAC: $25B Of USDC Mkt Cap In Circulation, CAGR At 6,100 Percent  

The latest entrant to the SPAC parade has all the buzz of crypto and blockchain, but is rooted in the dollar and in stablecoins.

Circle, the FinTech behind the USD Coin, the stablecoin backed one-to-one by the dollar, said on July 8th that it would go public via SPAC combination with Concord Acquisition Corp.

Under the terms of the deal, expected to close in the fourth quarter, Circle holders will maintain about 86 percent of the combined, publicly-traded entity.

The transaction values Circle at $4.5 billion.

Drilling into the financials presented by Circle upon the announcement of the transaction, the company said that the future of financial infrastructure rests with blockchain, marked by open networks, programmable with smart contracts and scalable.

USDC, Circle said in the document, is built on Ethereum and other emerging public blockchains, and remains compatible with U.S. federal and state regulations.

But the document also cautions that USDC is not a replacement for existing central bank money, and is not subject to counterparty risk.

There was about $22.6 billion of USDC in circulation, the company said, as of May 31 – the current tally, according to the company’s release, stands at $25 billion; the market cap has grown by a year-to-date CAGR of more than 6,100 percent.  The tally of historical on-chain transactions stands at $785 billion.

In reference to the market opportunity, the filing notes that the money supply stands at $130 trillion.  The global payments landscape is $35 trillion, while the crypto market is $2 trillion.

The total number of Circle accounts, at just under 2,800, is estimated to grow by 229 percent over the next few years, to more than 30,000 in 2023.

Operating Metrics and Assumptions 

In terms of the operating metrics, the company said that total revenue and USDC interest income should be about $115 million this year, growing by more than 250 percent next year and more than 118 percent subsequently to $886 million in 2023.  By that time, according to the projections in the document, the firm should be EBITDA (a rough measure of cash flow) positive, at $76 million.

Within the revenue line, Circle estimates that transaction and treasury services will grow to $622 million in 2023 from an estimated $65 million today.

The company also details expectations that SeedInvest revenue should grow at a CAGR of more than 160 percent to as much as $68 million in 2023.  SeedInvest is billed as an equity crowdfunding platform focused on private companies, “opening up startup investing to everyone.”  Thus far $300 million has been raised, across half a million investors, with more than 235 offerings.

In recent interview with Karen Webster, Circle CEO Jeremy Allaire detailed his view that there is room for a wealth of digital assets to grow and jockey for space, and consumer/commercial use case.

“There’s wide recognition that stablecoins running on public blockchain infrastructure are here to stay,” said Allaire.  Stablecoins operate in a compliant manner that the financial and payment industry participants can interact with, he added.

There’s also significant role for what Allaire called “digital commodity money” – and bitcoin is indeed a form of that currency. El Salvador recently embraced bitcoin as legal tender, and Allaire predicted that other nations, particularly in Africa, would consider similar routes toward adopting cryptos. “I think you’ll see more and more countries holding bitcoin and other digital commodity monies in reserve. I think it’s a smart move for more and more countries to do that,” he said.

“There are many, many different types of crypto assets that economically incentivize a lot of different things,” maintained Allaire in that interview. “All of them can grow…you’re going to see growth and prevalence in stablecoin adoption and digital commodity money as well … running hand-in-hand in more and more places around the world,” he said.

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