The U.S. money market industry is worth around $7 trillion and, according to stablecoin giant Circle, a growing portion of that will move to the blockchain. That’s why the company has decided to acquire a fast-growing crypto startup called Hashnote, which operates a tokenized money market fund that controls around $1.5 billion in assets—eclipsing the roughly $630 million held by BlackRock, which launched the first such product in early 2024.
Circle announced the acquisition on Tuesday but declined to disclose how much it paid for Hashnote, or share any other financial details related to the deal.
In an interview, Circle CFO Jeremy Fox-Geen described the deal as a strategic acquisition that will create a synergy between the company’s popular USDC stablecoin, and Hashnote’s USYC (US Yield Coin)—a yield bearing digital token that is backed by Treasury bills and other short-term loans typically found in a money market fund.
“The point of the acquisition is to bring the leading tokenized money fund into the Circle family,” he said. “The reason we want that is because we see having a money market fund, a tokenized treasury asset, as complementary to USDC—especially as you look at the digital asset trading case.”
What this means in practice is that Hashnote users will continue to use USYC as collateral for trading on a variety of crypto trading platforms, especially DeFi (decentralized finance) ones, and then more easily use USDC as a form of cash for settling those transactions or to move funds to other institutions.
On a broader level, Circle is framing all of this as another step in the finance world’s inexorable move towards a new, blockchain-based infrastructure. Fox-Geen cited arguments, long put forth by blockchain proponents, that the technology is superior because it creates a rapid and immutable ledger of transactions, allowing for reliable 24/7 trading.
Fox-Geen added that Circle’s acquisition of Hashnote will hasten the adoption of tokenized money market funds—which are still a tiny fraction of money markets more broadly—since users of all sorts will be able to enjoy DeFi-style trading, while relying on USDC for settlements. This combination promises a dramatic improvement over the current day-long settlement regime for trades, known as T+1, while freeing up capital in the process.
All of this puts Circle in position to compete with BlackRock’s BUIDL product, which recently expanded its money market-backed token to five new blockchains beyond Ethereum. It could also provide broader strategic advantages to Circle at a crucial time for the company.
Circle beefs up ahead of IPO
Founded in 2013, Circle and its founding CEO Jeremy Allaire have long been fixtures of the crypto scene, but have experienced dramatic ups and downs. Most recently, after the company’s flagship USDC lost significant market share after a series of crises in the latest “crypto winter” of 2022-2023, the company has been flying high during the current rally.
In early 2024, Circle filed an S-1—the form that firms file with the Securities and Exchange Commission when they are seeking to go public. In a common practice, however, the company filed the form confidentially and has yet to provide updates on its specific plans or timing.
Circle’s IPO plans are likely to benefit from recent growth. That includes the market cap of Circle’s USDC—on which it collects interest with its partner Coinbase—expanding to nearly $50 billion. Circle is also likely to benefit from a new pro-crypto climate in Washington, DC where a Republican Congress is preparing to move forward with long-awaited legislation to make stablecoins mainstream.
The acquisition of Hashnote, meanwhile, gives Circle a bigger presence in the world of DeFi. In announcing the deal, the company also noted it has entered a strategic partnership with DRW, one of the largest institutional crypto traders via its subsidiary Cumberland. In addition, Circle announced it is deploying USDC on Canton, a blockchain popular with major traditional banks, trading firms, asset managers and exchanges.
A final aspect of the Hashnote deal worth noting is that it means Circle will, through USYC, be offering a yield bearing asset for the first time since 2021, when regulatory pressure forced the company to shelve its own offering. This could provide a strategic advantage at a time when a host of new players –including fintech giants PayPal and Robinhood—are vying for a share of the stablecoin market, and promising to provide holders of their tokens with yields or other perks beyond what USDC offers.
