The most American thing an entrepreneur can achieve is taking their company public in an IPO. It’s the final stage of company growth, where product market fit has been found, initial growth targets reached, and generates revenue of a sufficient size that it might open its books to the public in return for capital from both retail and institutional investors alike. 

Millions of companies are started each year, but only a handful actually ever make it to IPO. Since 2000, an average of 264 companies debut on US public markets annually. Companies wanting to list on the Nasdaq or the New York Stock Exchange must meet stringent requirements for their earnings, market cap, trading volume and number of shareholders. 

And so today, Circle Internet Financial, the issuer of USDC, and EURC, announced that it confidentially filed for an initial public offering with plans to become a publicly traded company. They filed a draft registration Form S-1 with the Securities and Exchange Commission (SEC) for the public sale of its equity securities. No other information about valuation, number of shares, or timing were given. 

Circle has had IPO plans for several years now that CEO Jeremy Allaire has spoken publicly about. Last year, Circle had tried to go public using a Special Purpose Acquisition Company (SPAC), however, the deal fell through in the wake of FTX’s collapse. At the time, Circle had been estimated to be valued at $9 billion when it tried to go to market with Concord Acquisition Corp. in late 2022

“We are disappointed the proposed transaction timed out, however, becoming a public company remains part of Circle's core strategy to enhance trust and transparency, which has never been more important," said Jeremy Allaire, Co-Founder and Chief Executive Officer of Circle, when the SPAC deal fell apart.

Back when Circle launched in 2019, their long term revenue outlook was questionable. Rates were near zero and they were burning millions of dollars in expenses annually. 

After DeFi Summer kicked off, and Bitcoin ran up to 60k, demand for USDC skyrocketed. USDC circulating supply peaked at $56 billion, and Circle’s revenues also increased to $779 million for the first half of 2023, exceeding the $772m they earned for all of 2022.

“That’s significantly more than we had expected, and allows us to have a lot of staying power as a company to invest, build out major new revenue streams, build on major new products, and execute global international expansion profitably,” Allaire said.

With interest rates at 20 year highs, Circle’s balance sheet became cash rich, with the company declaring they had a $1 billion buffer to weather any future storms and continue operating through the bear market.

Now that the Bitcoin ETFs have been approved, demand for Circle’s USDC most likely will rise as it heads towards IPO. Since the collapse of FTX and the fall of Silicon Valley Bank, Circle’s market cap has declined by 50%, while competitor Tether’s USDT increased from $85bn to $101bn. 

The Silicon Valley Bank collapse in March 2023 rattled a lot of feathers in the crypto industry. Circle was the top depositor at the now defunct bank, with over $3.3 billion held. Regulators stepped in to protect creditors after SVB mismanaged its interest rate risk exposure. When SVB was shut down, USDC de-pegged from the dollar, before recovering several days later when banking services were opened again and Circle was allowed to move its deposits to another bank. 

The de-pegged affected several stablecoins using USDC as its primary reserves, FRAX included. The price of FRAX declined to $0.94 cents according to data, spurring the Core Team to rapidly develop and deploy Frax V3, which onboarded other types of collateral such as PYUSD and USDP to help offset risk. 

Circle’s IPO signals a shift for the company and potential for new growth in 2024. As USDC is still a large part of Frax’s balance sheet and liquidity, a revival of USDC usage would be highly beneficial for Frax.

When the news broke this morning about Circle’s IPO, the market responded positively to the news, pushing the price of FXS to yearly highs of $10.49. 

Ultimately, Circle’s IPO gives Wall Street an opportunity to get allocated DeFi in the same way the Bitcoin ETF provides BTC exposure. This IPO is yet another nod of acceptance of stablecoins by the US regulatory regime and further legitimizes them as a digital asset. Frax stands to benefit greatly from this development as TradFi managers and liquidity pour into DeFi looking for the next big opportunity as hundreds of billions if not trillions of dollars in TVL pour into the world on-chain.