Circle

By: David Marc
Updated: June 11, 2018

Circle raised $50m in May 2015 to provide a simple, cashapp-like bitcoin brokerage to allow for easy and instant buying of bitcoin. A year later, they announced they were getting out of bitcoin to focus on other things.  Those other things appeared to be a social money transfer app, which had modest traction.  Now, after missing the 1000%+ jump in value since their pivot, they have announced their circle back to “crypto investing” and acquired Poloniex.  Color us somewhat unimpressed, but we will be keeping our eye on them.  Check out our picks for the best Bitcoin US Bitcoin Exchanges for deserving products.

Below is our review from 2015.

Alongside Coinbase, Circle has the most potential in the bitcoin exchange space to transform global financial markets.  Circle’s $50 million May 2015 fundraising round, led by lead investor Goldman Sachs, is an impressive counterpunch to Coinbase’s $75 million round in January, and the two exchanges now find themselves well ahead of the rest of the pack in terms of financing.  

Alongside news of the $50 million funding round, Circle announced the launch of a FDIC-insured USD wallet, allowing users to hold dollars in Circle accounts with the same peace of mind as if the funds were held in a standard bank account.  Users may instantly make and receive payment in bitcoin, with instantaneous exchange to and from dollars occurring automatically at the point of sale if required. Additionally, transfers can be made between users – in either bitcoin or dollars – instantaneously, through masterfully designed Android and IOS apps, which should prove incredibly intuitive and familiar to new users.  It is the ambition of Circle to roll out fiat wallets in additional currencies – first in Chinese Yuan, British Pound and Euro – which would allow instant currency exchange seamlessly and almost invisibly powered by bitcoin. Such a product has the potential to transform the foreign exchange and remittance markets with nearly-free, instant and global transactions, while users need hardly be aware that bitcoin is being used to facilitate transactions.    

Security

Two factor verification is available upon sign in, as well as when withdrawing and sending funds.  For the latter options, users can either necessitate two factor on any amount request, or at bespoke levels.  Additionally, under the settings menu, users are able to see whether there are any additional sessions open on mobile or desktop, and can choose to sign out of other sessions.

User information is encrypted, and most bitcoin is kept in geographically dispersed offline vault facilities, which are highly protected.  All bitcoin, both on and offline, are fully insured against theft, provided that the lost bitcoin are not a result of a failure on the part of clients to maintain adequate security.  According to Circle’s terms and conditions, this includes:

Maintenance and security of all account names, passwords, user IDs and pins, and ensuring account information is up to date.  Users must inform Circle immediately if there is a suspected breach, and accounts must be closed at the end of every session.  In the event that damage is caused by spyware, viruses, or any other malware, Circle is not liable for losses.

The USD account, on the other hand, is FDIC-insured, meaning that even theft resulting from client-side error is covered.  In other words, if you are not interested in bitcoin speculation, best to maintain account in USD.

100% of customer deposit value is maintained as reserves, and audited financials are provided to Us regulators, as required by law.

Gravitas

Circle has attracted capital investment from mainstream firms such as Goldman Sachs, China’s IDG Capital Partners, General Catalyst Partners and others due to an extremely strong and well-known management team, and a strategic focus on compliance.  Jeremy Allaire, Circle Founder and CEO, has founded a number of startups that eventually went public, and has established himself as a big name in the high tech marketplace. Mr. Allaire has been very involved in advocating for sensible bitcoin regulations within and without the US, and has emerged as one of the leaders in this regard.

The board of directors is comprised of a number of representatives from  Circle investors, including Goldman Sachs director and board member M. Michelle Burns, Quan Zhou from IDG Capital Partners, who is surely tasked with aiding in Circle’s strategic expansion to China, and managing directors from Fenway Summer, General Catalyst and Breyer Capital.    

Circle is regulated by FinCen as a money transmitter, permitting brokerage services to US residents.  Though Circle is currently seeking state-by-state licensing, establishing an exchange does not seem to be central to Circle’s vision.

This all goes to illustrate Circle’s seriousness in the marketplace.  Circle is most definitely not going anywhere, and the large sums invested by leading investment firms such as Goldman Sachs is a testament to Circle’s strategic vision and operational effectiveness.

Opening an Account

Circle’s account opening process fulfills KYC requirements whilst not sacrificing user-friendliness, and should be emulated by other exchanges.  After inputting standard biographical data and confirming email and telephone number (also used to automatically set two-factor authentication), users are requested to photograph, with their smartphone, a government issued ID and take a selfie, which is matched usually within a matter of minutes against the biographical information entered upon registration.  Next, US-based users are asked to link bank account, which allows for fee-free ACH transfers, and credit card details. To add a bank account, users must provide routing, account number and social security number. When successfully entered, a small amount will be sent from circle to the bank account, which is used to confirm that the account does, indeed, belong to the user.

Bank account deposit/withdrawal limits are capped at $2,500/$10,000 per week.  Credit card are capped at $500/$1000 weekly.

Software Review

Circle is meant for the mainstream, nontechnical user, offering an extremely intuitive method of buying, selling, transferring and spending bitcoin, and they deliver against this mandate.  First, there is no actual mechanism for buying and selling. Rather, as of May 2015 – i.e. before the introduction of cash accounts – deposits into Circle are automatically converted into bitcoin.  The amount held in the account is displayed first in dollars,which fluctuates as the market moves, and underneath in bitcoin, which remains a constant value, provided no additional transactions are made.  The act of withdrawing automatically converts the bitcoin back into USD.

Transfers can be made instantly and free to another Circle user, and all that is required is the email or bitcoin address.  If a user prefers to keep the account in USD, transfers can still be made in the exact same fashion, and if exchange to bitcoin is required – for instance, for a bitcoin purchase – the exchange is automatically made upon sale.  Circle has essentially removed all conversion aspects from the users control, offering the benefits of digital currency without the need to use an entirely different currency.

It goes without saying, but the product is meant for the mainstream user and will most likely not be the solution required by more advanced bitcoin traders or speculators.

Mobile

The Circle for bitcoin android and IOS apps are masterful; indeed, the product seems to have been developed using a “mobile-first”strategy.  The native applications are extremely intuitive, sure to appeal to those familiar with mobile banking. The full registration, including KYC verification, can be easily completed using a smartphone.  Indeed, the process of uploading ID pictures was optimized for handheld devices and Circle, with a users permission of course, accesses the smartphone camera to upload photos directly. Connecting bank or credit cards is just as simple via the app, and deposit and withdrawal options are offered with extremely large and finger-friendly buttons and text navigation.  The transfer bitcoin option automatically pulls up a user’s contact list, and payments can be sent via email.

Fee Structure

Circle doesn’t have set fees, and doesn’t work on a spread between bid and ask, as you would expect from a market maker.  Instead, Circle operates a choice pricing model, in which the cost of bitcoin is determined based on the buy/sell volume. It is assumed that circle makes money by setting the price either higher or lower than their market equilibrium, but they have been unclear as to how or if they make a profit.

Support

A breath of fresh air, there is actually a help line available –  1-800-398-7172 – from 10am to 2pm est on weekdays, something of a novelty in the bitcoin market.  Of course email support is available 24/7. I sent a test email at 1 am and got a response at noon the following day.  Would imagine that, if sent during business hours, response time would be much quicker. There is a length knowledge center which will answer many questions.  However, Circle’s predisposition for simplicity at times conflicts with a user’s need for information – for instance, it is a bit of a task to find information on security, which is foremost on people’s mind when getting into bitcoin.   

Bottom Line

Circle offers users an extremely easy and user friendly method for buying, selling and transacting in bitcoin.  It both illustrates and delivers to users the advantages digital money without the need for in depth understanding of cryptocurrencies.    As a mechanism for expanding the appeal of bitcoin to a wider group, this is a triumph in and of itself.

In the introduction, it was said that Circle has the ability to fundamentally transform the global foreign exchange and remittance markets.  Circle’s recent addition of the USD wallet is the first step in this regard. The integration of Euro, Pounds and Yen wallets are the second steps, and it is a very short walk from there to a unified, international wallet in which global travelers need not worry about exchanging dollars to pounds or Euro and back again.  The Circle wallet, insured at bank-grade level, would then offer free and seamless exchange between different currencies within a user’s account at a single click of the button. From there, how long is it until international debit cards are issued, and additional, more exotic currencies are integrated to solve the remittance problem?  

It is true that Coinbase is ahead in this race, as euro and pound wallets have already been integrated.  And yet, it could be that the simplicity of the Circle app will have much wider appeal towards those that are not interested in bitcoin itself, but like what it can do.  There is room for a number of different exchanges catering to different demographics in this space, and Circle will most definitely be along for the long haul.