Report: Circle Internet Financial May Sell SeedInvest, its Crowdfunding Division

Circle Internet Financial is reportedly looking for a buyer for SeedInvest, its crowdfunding division, as the Boston-headquartered crypto firm aims to focus more on its stablecoin business, according to the Block.

This is notably Circle’s latest downsizing move, which began in 2019 when the firm spun out digital asset exchange Poloniex. Circle acquired the trading platform for $400 million back in 2018.

However,  in December of last year, Circle’s management sold its over-the-counter (OTC) cryptocurrency trading desk to digital asset exchange Kraken in a transaction one investor said was a “fire sale for approximately $1 million.” 

On February 12, 2020, Voyager acquired Circle’s retail trading app Circle Invest through an all-stock transaction. The deal involves Voyager issuing its common shares to Circle Internet Financial, which represents almost a 4% ownership stake. 

This now leaves Circle with only SeedInvest, however, according to a report the company says it’s planning to let it go as well as it aims to focus mainly on new projects involving its stablecoin USDC and various other digital assets pegged 1-to-1 with major fiat currencies or real-world assets. 

USDC is managed by a consortium known as CENTRE, which also includes San Francisco-based crypto exchange Coinbase as a member. 

SeedInvest was acquired in late 2018 with the transaction officially closing the following year.

The purchase was notable as it was deemed indicative of changes in both the digital asset sector as well as the more established securities crowdfunding industry.

SeedInvest brought along a broker-dealer license as well as approval to operate an alternative trading system (ATS). Both were viewed as valuable for a crypto-centric operation that was focused on being regulatory compliant.

Circle acquired SeedInvest in order to expand into the business of security tokens and other possible esoteric assets.

The same report indicated that Circle was experiencing challenges finding a legitimate buyer as there are concerns over how the initial acquisition was made.

A quoted source that was said to be familiar with the issue stated:

“The deal is very hairy; so I’m sure anyone looking at the deal is turned off because it’s not easy to digest.”

SeedInvest is one of the largest investment crowdfunding platforms that offer the full stack of securities exemptions available for issuers. It is recognized as being a highly selective platform only accepting higher quality deals while offering terms more in line with traditional venture capital requirements.

The sale of Circle Trade, a division which served as a piggy bank for the company (according to sources), was a big disappointment. Circle had been a leading crypto company back in 2018 and had the best counter-party business relationships, managing the trading of around $24 billion in digital currency.

However, sources told The Block that the division was unable to make the necessary updates because financial resources were allocated to Poloniex and Circle Invest’s business operations instead.

Circle now says it’s planning an additional round of business changes including updating its official website which will focus on the firm’s stablecoin business.

Circle’s USDC supply has roughly doubled during the past year from around $252 million in February of last year to currently over $441 million. But that’s still considerably lower than its all-time high of more than $520 million toward the end of 2019.

Circle also may provide a digital asset banking platform-as-a-service to companies interested in interacting with traditional or legacy financial platforms. These services may include crypto-asset custody, risk and identity management, and compliance solutions.

Circle representative Josh Hawkins has noted:

“Circle is working on broadening and expanding the adoption of stablecoins for businesses, including offering commercial accounts for businesses that want to have a convenient environment to convert, store and use USDC for payments and settlements, and a companion suite of API services that open up Circle’s crypto platform infrastructure to developers.”

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