Crypto Bank of America

When it comes to mainstream consumer adoption of bitcoin, the primary attributes missing from the crypto-currency infrastructure are trust and simplicity. With venture capital flowing into the sector like water, countless entrepreneurs have set out to tackle pieces of the puzzle, some building wallets, others payment platforms and exchanges. But no one yet has cracked the code so as to make a practical and compelling way for main street users to adopt virtual currency.

Today at the Bitcoin 2014 conference in Amsterdam, Boston-based Circle unveiled its solution aimed at “evolving consumer finance, giving people greater control of their own money, and enabling Bitcoin as a mainstream solution globally,” as co-founders Jeremy Allaire and Sean Neville wrote in a blog post on the company’s website today.

Circle began attracting attention in the fall when the company announced that it had raised $9 million in Series A funding from General Catalyst Partners and Accel Partners*. But at the time, the company revealed almost no details about the product it was building. Consider the market peaked. This curiosity hit a frenzied new peak when the company subsequently announced $17 million in Series B funding less than six months later that added Bitcoin Opportunity Fund, Pantera Capital, Breyer Capital, and Oak Investment Partners to its list of backers.

So what is all the hype about?

As its founders explained today, Circle is designed to be a comprehensive financial services company for the digital currency age. Think of it like a CryptoBank of America. Users can connect the Web-based platform to their traditional bank accounts and credit cards and move money in fiat and virtual denominations between each. More importantly, and unlike any other company in the industry today, these financial transactions happen nearly instantly – in minutes rather than the normal days – and entirely for free.

“Our goal is supporting Bitcoin as a payment utility and as a secure store of value,” CEO Jeremy Allaire tells Pando. “We’re not interested in or focused on the speculative value of bitcoin. But almost all the existing solutions for consumers to store and use bitcoin are trading platforms in one form or another.”

Crucially, given the repeated failures of bitcoin companies to protect customer deposits, Circle employs some pretty substantial security measures across its platform. The company employs multi-signature transactions throughout both its “hot wallet” and “cold storage,” meaning that digital or physical attackers would need to breach multiple systems in multiple locations simultaneously to successfully compromise the system. The company also uses what it describes as military-grade hardware encryption and has hired a national cyber security firm to conduct regular audits and pressure-testing. Finally, and most uniquely, Circle offers deposit insurance backed by multiple global underwriters to protect users from losses should its systems be breached in any way.

To reiterate, all this is entirely free. Given the above, Circle looks to be the most comprehensive and approachable consumer platform in the industry today.

“Early bitcoin products were too complex and unfamiliar.” Allaire says. “We’ve always asked ourselves, how can we make virtual currencies appealing to the mainstream, and the answer was to make them as easy to use as gmail made email. We tried to reduce friction wherever possible but making it easy to instantly create an account, verify identity, connect to existing financial systems, and us deposits to transact. We want to help move bitcoin beyond the speculative phase.”

Circle screenshots

Of course, the natural question when someone shouts FREE from the rooftops is to ask, what’s the catch? In he short term, at least, the answer appears to be, there is none.

Circle raised enough cash that it can afford to give away what it views as basic services for free, the way large banks do checking accounts. The goal is to increase adoption, both of the Circle platform and of bitcoin as a concept.  And while Circle will surely look to generate revenue down the road, it will be from additional services not available today, Allaire says, meaning that what consumers see today will always be free.

“The best estimates are that there are two to three million users of bitcoin worldwide,” Allaire says. “But something like 90 percent are holding those bitcoins in the hope that they’ll go up in value, meaning that the number using bitcoin as a utility is likely in the hundreds of thousands. It’s really critical right now to establish the utility value of using digital money. We’re looking at the long game and working to see this market expand to all consumers with internet connectivity.”

But, despite this goal of ubiquitious adoption, Circle is not yet generally available. The company is shifting today from a closed private beta to an invite-only public beta, meaning it will still throttle signups like so many hot new consumer platforms of late. Those interested in using the platform can enter their email address on the company’s website and take their place in line.

Circle is a registered Money Transmitter within the US and complies with all relevant state and federal KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations, Allaire says. This means that users wishing to store bitcoin with the company can get away with verifying only their phone number and email address. But those choosing to connect bank accounts and credit cards must also verify name and address. Also, users making a large number of transactions or with other red flags in their activity or profile may be required to provide additional information or be subject to account restrictions.

Keeping on the right side of regulators will be a major focus for Circle, appropriately so, but also represents a significant risk for the young company both in terms of costs and the uncertainty of an ever changing environment. It’s a risk that Circle shares with all its competitors, but one that can’t be overlooked when assessing the company’s likelihood of succeeding in its mission.

Allaire’s company is based in Boston today, with an outpost in Silicon Valley as well as an international headquarters in Dublin in the works. But at the outset, the company has only integrated with the US banking system, meaning that some functionality will be limited to overseas users. Expect that to change quickly if the CEO gets his way.

Bitcoin has a long way to go before it becomes a truly viable alternative to traditional physical currencies. But the availability of feature rich but approachable platforms is a key step in the process toward changing that. Circle may be the newest and most compelling product in the market today, but it’s hardly the only company working to solve this problem. That means plenty of competition for the well-funded Boston company, but also much-needed choice for consumers.

My mom is still unlikely to be transacting in bitcoin any time soon, but the notion that she may one day join the digital currency revolution suddenly seems much less far fetched than it did just a few days ago.

[Disclosure: Accel Partners is an investor in Pando.]

  1. We’re entering a more deeply integrated world economy, driven by the Internet, where social identities, media, communications and commerce flow freely across the planet, instantly and with virtually no cost to users. Yet our existing infrastructure for handling money remains decades old, frustrating users and creating an enormous tax on our world economy.

    Something big has to change. We want to help.

    To do this, Circle is building a suite of online products for end-users, businesses and charities aimed at enabling greater ease-of-use in online and in-person payments, enhanced security and privacy for consumers, and lower costs for businesses in accepting digital payments.