Circle Turns To Cash Reserves To Battle PayPal And Tether For Stablecoin Supremacy

Circle Internet Financial USDC/USD is relying on its substantial cash reserve of more than $1 billion to navigate the increasing challenges posed by non-crypto entities such as PayPal Holdings Inc PUSD/USD

The company wants to reverse the dwindling market share of its stablecoin, which ranks second in the market. Since the start of the year, the circulation of Circle's USD Coin has sharply decreased from $45 billion to approximately $26 billion, and in contrast, Tether, the leading stablecoin, has seen growth in the same timeframe.

Circle CEO Jeremy Allaire attributed this decline in part to Binance BNB/USD, the largest crypto exchange globally, which shifted its focus from USD Coin to promoting its own token about a year ago.

Circle's disclosure in March about its $3.3 billion exposure to the now-defunct Silicon Valley Bank further impacted the trust in USD Coin.

Allaire commented on the situation, stating, "We were meaningfully generating cash."

He also recognized that various "tail-risk events" in the crypto world influenced USD Coin's adoption.

"The Terra collapse helped us; the Binance forced conversion hurt us. The FTX collapse sort of helped us, and then the failure of regional banks hurt us."

Also Read: FTX Bankruptcy Battle Turns Ugly As Management And Creditors Clash

In the first half of the year, Circle reported revenues of $779 million, surpassing its 2022 total of $772 million.

The company's adjusted earnings for the first half stood at $219 million, outdoing the previous year's total of $150 million.

As of June, Circle's cash reserves exceeded $1 billion.

Allaire expressed optimism about the company's financial position: "That’s significantly more than we had expected, and allows us to have a lot of staying power as a company to invest, build out major new revenue streams, build on major new products, and execute global international expansion profitably."

Having founded Circle in 2013 after leading other tech ventures, Allaire envisions a future where stablecoins become the standard currency for the digital age.

He believed that PayPal's recent announcement was just the tip of the iceberg.

"I expect you will see many many, not just internet payments firms, but also all kinds of financial services companies and others begin to get more involved in this," he added.

"It’s great to have this new competition — I do think it’s going to drive more and more companies into the field.”

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