Earlier this month, Circle announced it would go public at a valuation of $4.5 billion. The company issues USDC, a crypto token that’s pegged to the dollar that’s known as a so-called stablecoin.
The amount of USDC circulating today has exploded this year. It rose from about $1 billion last year to over $26 billion today. Pretty good for a coin that does just one thing: stay stable.
The Circle listing will be crypto’s second most important public-market debut, after Coinbase’s direct listing in April. It will mark the continued maturation of key tools in the crypto toolbox, from markets to trade tokens like Coinbase to dollar alternatives like USDC. It’s worth noting that USDC is technically jointly issued by both Circle and Coinbase, through an entity called the Centre Consortium.
Circle’s listing also spotlights a new narrative that’s taking hold: that stablecoins, and their close cousin, the central-bank digital currency, or CBDC, are the interesting thing about crypto. It’s the thing that serious people in suits and ties talk about; not the shenanigans committed by people in unicorn hoodies and anime avatars. “Stablecoins, not crypto” may be the reformulation of the claim that it’s “blockchain, not bitcoin” that’s the revolutionary thing produced by the collision of cryptography and money.
The “blockchain, not bitcoin” ethos probably reached its zenith with the Bloomberg Markets cover featuring former JP Morgan bigwig Blythe Masters as its star. She had just joined a company called Digital Asset Holdings as its chief executive. The firm was supposed to take the best bits from cryptocurrencies like bitcoin, and build real technology for real financial institutions.
A cottage industry of consultants and vendors flourished around this idea. There was IBM Blockchain, which also touted the salutary effects of a blockchain—minus the coin—on industries as far flung as shipping and tracking pork across China. Sober accounting firms like EY and PwC had their consulting divisions throw their hats in the ring to figure out solutions to more reliable land registry operations and digital identity using blockchains—again, stripped of any coins.
We see a similar manic phase brewing today with stablecoins and their close cousins CBDCs. You see, the blockchain-not-bitcoin narrative withered away in crypto winter—as impacted by the downturn in coin prices, despite the fact that they claimed coins were the unwanted byproduct of blockchains. IBM reportedly shuttered its blockchain unit; the various schemes using coinless chains went nowhere; and Blythe Masters herself departed Digital Asset Holdings for the more familiar realm of traditional private equity.
Perhaps the most illustrative episode of the death of “enterprise” blockchains is the well publicized defection of former EY blockchain chief Angus Champion de Crespigny. From being paid by corporations to tell them how blockchain technology could solve their problems, he became someone who spoke out publicly against corporate use of blockchains. “I [don’t] see where private blockchains could create any value to business,” he told Barron’s.
But, just as the “enterprise blockchain” bubble was deflating, the hot air released appeared to be captured by a new vessel. It turned out that one of the biggest enterprises yet was interested in its own blockchain, and this time it would have a coin—sort of. Facebook’s Libra project, a proposal to create a stablecoin within the Facebook system, was much rumored and finally announced in 2019, sparking a multi-year rush to figure out stablecoins among the cryptorati and central bankers alike.
At first, it was global monetary minnows who were interested in the notion of a CBDC. There was the Bahamas with its “sand dollar” project, for instance. Sweden made noises about an e-krona. But as the hype around digital money built, it began to attract bigger fish. Today, the European Central Bank is working on the next phase of a CBDC investigation, which might see a full implementation of a digital euro by the middle of this decade. The Federal Reserve is also deep in the throes of CBDC explorations, with Jerome Powell telling Congress that a major report on the matter is due in September.
The outlier to the CBDC hype has been China. It has been working on a digital yuan for years, and is the furthest ahead when it comes to major economies. While most “CBDC, not crypto” projects are at various exploratory or trial stages, the digital yuan has already transacted $5 billion, and continues to develop apace. Innovation vaporware this is not.
Summing up the latest, “CBDC not crypto” fervor is the Basel-Cbased Bank of International Settlements, also known colloquially as the central bank for central banks. Its last annual report had plenty to say on the subject. “By now, it is clear that cryptocurrencies are speculative assets rather than money,” it inveighed. “Bitcoin in particular has few redeeming public interest attributes.” It judged CBDCs, built on private blockchains, rather differently: “They are an advanced representation of money for the digital economy.”
The striking thing about the latest efforts to ditch cryptocoins in favor of “blockchain technology” is the increasing recognition that cryptocurrencies are here to stay. For instance, China’s central bank recently said for the first time that its digital yuan uses smart contracts—a feature pioneered by Ethereum. Circle’s USDC stablecoin is, in essence, a smart contract built on Ethereum, and now widely integrated across various public blockchains. And CBDC projects of all stripes speak of “open platforms” as key to their potential benefits.
It seems that with each boom and bust cycle of “blockchain tech,” the end result keeps getting closer to a public, permissionless, version of the technology. In other words, it might turn out that crypto, not blockchain, is where all the value lies.