Circle acquires Hashnote, which just overtook BlackRock in tokenized money market funds

Jeff John Roberts

<p>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&#8217;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—<a href="https://www.coindesk.com/markets/2024/12/20/de-fi-protocol-usuals-surge-catapults-hashnotes-tokenized-treasury-over-black-rocks-buidl">eclipsing</a> the roughly $630 million held by <a href="https://fortune.com/company/blackrock/" target="_blank">BlackRock</a>, which launched the first such product in early 2024.</p><div class="paywall-selector"></div><div class="paywall">



<p>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.</p>



<p>In an interview, Circle CFO Jeremy Fox-Geen described the deal as a strategic acquisition that will create a synergy between the company&#8217;s popular USDC stablecoin, and Hashnote&#8217;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.</p>



<p>&#8220;The point of the acquisition is to bring the leading tokenized money fund into the Circle family,&#8221; he said. &#8220;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.&#8221;</p>



<p>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.</p>



<p>On a broader level, Circle is framing all of this as another step in the finance world&#8217;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. </p>



<p>Fox-Geen added that Circle&#8217;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.</p>



<p>All of this puts Circle in position to compete with BlackRock&#8217;s BUIDL product, which recently <a href="https://www.coindesk.com/business/2024/11/13/blackrock-expands-tokenized-fund-buidl-beyond-ethereum-to-five-new-blockchains">expanded</a> its money market-backed token to five new blockchains beyond <a href="https://www.binance.com/en/price/ethereum">Ethereum</a>. It could also provide broader strategic advantages to Circle at a crucial time for the company.</p>



<h2 class="wp-block-heading">Circle beefs up ahead of IPO</h2>



<p>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&#8217;s flagship USDC lost significant market share after a series<a href="https://fortune.com/crypto/2023/09/06/circle-regulation-jeremy-allaire-usdc-stablecoin/"> of crises</a> in the latest &#8220;crypto winter&#8221; of 2022-2023, the company has been flying high during the current rally.</p>



<p>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.</p>



<p>Circle&#8217;s IPO plans are likely to benefit from recent growth. That includes the market cap of Circle&#8217;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.</p>



<p>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.</p>



<p>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.</p></div>

The stablecoin giant is facing off against BlackRock in a bet that more money market transactions will move on to blockchain.

Circle acquires Hashnote, partners with DRW

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