Banking Capital markets News

Blackrock invests in Circle to explore USDC stablecoin for capital markets

blackrock

Today Circle, the issuer of the USDC stablecoin, announced a $400 million funding round that includes BlackRock, Fidelity, Marshall Wace and Fin Capital. Circle is planning to list through a SPAC deal with the latest agreement in February, upping Circle’s valuation to $9 billion. It has a target transaction date of 22 December 2022.

The current market capitalization of the USDC stablecoin is $50.8 billion, down from $53.5 billion in late February.

Today’s announcement featured significant news that BlackRock plans to explore capital markets applications for USDC. The investment company has ten trillion in assets under management.

Circle has previously stated that it intends to become a bank, and if it were to be involved in large-scale transactions with BlackRock, it’s far more likely it would need to have a Federal Reserve account. 

Another stablecoin provider, Paxos, ran a securities post-trade settlement project for a couple of years with major institutions such as Credit Suisse, Bank of America, Societe Generale and Instinet. The project used a permissioned blockchain rather than the public blockchain Paxos dollar. From a legal perspective, it had a no-action letter from the SEC as it didn’t hold a license as a clearing agent, although it is a New York regulated trust company.

In contrast, Circle holds a money transmitter and virtual currency license in New York.

There’s a preference for using central bank money for securities settlement in other jurisdictions. In Switzerland, the SIX Digital Exchange (SDX) is using tokenized money using its account held at the central bank, a synthetic CBDC. And Fnality, backed by 15 major institutions, including Nasdaq, is soon to launch a settlement token based on an English central bank account, also a synthetic CBDC. Today, the DTCC announced it will trial a prototype CBDC for securities settlement working with the private Digital Dollar Project.