USDC stablecoin issuer will increase headcount by 25% in 2023

Circle Internet Financial Ltd. wants to increase its workforce by as much as 25% this year, finance chief Jeremy Fox-Geen said, as the cryptocurrency operator pushes ahead with expansion despite its recently canceled deal to go public and industrywide layoffs.

The Boston-based company, which operates the USD Coin stablecoin, or USDC, had about 900 employees at the end of last year and in 2023 it expects an increase of 15% to 25%, or an additional 135 to 225 workers, he said. That’s a lower growth rate than it had in 2022, when head count roughly doubled from 2021.

Circle is still hiring even as many crypto companies are laying off staff and some have filed for bankruptcy following the run on the stablecoin TerraUSD last spring.

“We are growing and investing and we are fortunate to be in a financial position to be able to sustain our investments,” said Mr. Fox-Geen, who joined Circle in 2021 from real-estate investment trust Safehold Inc. “We have slowed down growth prudently and are focused on what matters most.”

Circle last year raised $400 million in a funding round from a group including asset managers BlackRock Inc. and Fidelity Investments Inc., bringing its total funding to $1.1 billion.

The crypto company had been preparing to go public via a merger with a special-purpose acquisition company, a move to access the capital market, enhance its transparency and further expand operations internationally.

But Circle and the SPAC, Concord Acquisition Corp., called off their merger in December after several rounds of questions raised by the Securities and Exchange Commission over their disclosures caused Circle to miss its deadline to close the deal despite responding to the regulator’s queries. A SPAC typically has as long as two years to find its merger partner, clear the SEC’s review process and complete the deal.

Circle’s offering required the SEC to approve the proposed merger by declaring the registration statement effective. If the deal can’t clear the SEC’s review process in time, the SPAC must return the money.

Circle, which was founded in 2013, intends to make another bid to go public, though likely not this year, Mr. Fox-Geen said. It is waiting for better market conditions and more distance from the TerraUSD crash and the implosion of crypto exchange FTX so that public-market investors can re-evaluate the future of digital-assets businesses, he said. “We plan to continue on our path to go public and will take necessary steps to achieve that as soon as practicable,” he said.

Crypto businesses are facing heightened regulatory pressure. Circle in 2021 said that Poloniex LLC, its discontinued crypto exchange business, paid $10.4 million to settle a case brought by the SEC. Poloniex neither admitted nor denied the SEC’s claims that it failed to register as a national securities exchange.

“Maintaining our regulatory position of compliant posture, of good relations and most importantly just doing business the right way is critical to our future success,” Mr. Fox-Geen said.

The company reported revenue and interest income of $274 million and net income of $43 million for the quarter ended Sept. 30, the latest period available. For the year-earlier quarter, it posted revenue and interest income of $19.6 million and a net loss of $138.7 million.

Circle is investing in technology and labor to prepare for things that stablecoins could eventually do, said Joseph Vafi, managing director of equity research at investment bank Canaccord Genuity LLC. “Today it’s mostly helping crypto traders move in and out of trades but not totally off the blockchain,” he said. “Tomorrow it could be helping to settle trades in other asset classes like equities and later on it could be a way for people to buy goods and services.”

Circle said it held $44.69 billion in USDC reserve assets as of Dec. 31, up from $42.42 billion a year earlier. The volume of issued USDC stablecoins totaled $42.11 billion as of Tuesday, down about 20% from a year earlier, due to investor pullback in the crypto market, according to usdc.cool, a stablecoin tracker from Web3 development firm M2 Labs.

Traders in decentralized finance, or DeFi, generally prefer Circle’s USDC over Tether, operated by rival stablecoin business Tether Holdings Ltd., in part because it’s easier and cheaper for financial companies and individual traders to mint and redeem, said Riyad Carey, research analyst at crypto data firm Challenger Deep SAS, which does business as Kaiko. Although crypto investors in recent months have diversified among various stablecoins, Tether is the best-known and most widely traded.

Circle remaining privately held for now is more of a missed opportunity than a roadblock, said Michael Miller, an equity analyst at financial-services firm Morningstar Inc. The company’s payments-oriented business model puts it in a sturdier financial position than crypto firms specializing in trading, lending or mining, he said.

With the SPAC deal timing out and the diminished prospects for additional funding given recent crypto-industry hurdles, Circle will need to be more cautious in how it manages its investment spending and cost structure, Mr. Miller said. “Not having access to additional funds is going to make it harder to grow,” he said. “You can’t scale up quite as quickly with less access to capital.”

This material is taken from the website https://www.wsj.com.