Circle, the issuer of the USDC and EURC stablecoins, has unveiled the Circle Payments Network, which aims to remove frictions for mainstream cross border payments using stablecoins. While stablecoins have primarily been used in crypto and by residents in economies with volatile currencies, momentum has been building towards a bigger role for stablecoins in addressing the frictions of cross border payments.
This is the company’s move to create a vertically integrated payments network where it doesn’t just provide the stablecoin payment instrument, but also coordinates on and off-ramps as well as FX and currency liquidity. The Circle Payments Network will initially involve APIs but evolve into a smart contract protocol, with the governance and responsibility for standard setting remaining with Circle.
The goal is to empower consumer, business and institutional payments.
It’s working with banks and 28 payment firms to design the network. The banks involved include Deutsche Bank, Santander, Societe Generale and Standard Chartered. Additionally, it will integrate with Fireblocks, which has 2,000 institutions connected to its network, many of them crypto firms.
“With programmable infrastructure at its core, CPN makes it possible to embed value transfer into modern financial applications in ways that weren’t feasible before,” said Nikhil Chandhok, Chief Product and Technology Officer at Circle.
CPN: How it works
If someone wants to make a payment from the United States to the Philippines, the sender would onboard onto USDC and the originating financial institution submits a request for quotes across the CPN. Financial institutions in the recipient country would respond, with the originator confirming the best quote, and the stablecoin transaction proceeding.
“Over time, the system will transition to a fully onchain architecture for FX routing, aggregation and settlement—providing direct access to onchain FX pools, order books, and private liquidity,” the whitepaper states.
The business model will involve three sets of fees. Financial institutions in the recipient country will receive payout fees; there will be FX spreads; and Circle will charge a network fee which will be a “variable basis-point charge, tiered by country group”.
Currently, many of the startups that are partnering with Circle are creating their own on and off-ramps, so there’s significant duplication of effort. But Circle isn’t the only one eyeing this opportunity.
Ubyx is a new startup eyeing the same space, but with a willingness to work with a variety of stablecoins. With its founder coming from the banking space, there’s a slightly greater emphasis on banks. If Ubyx takes off, one of its benefits could be to level the playing field, potentially enabling smaller stablecoins to compete more effectively. It remains to be seen whether it will be able to head off the likelihood of an oligopoly of stablecoins.
Meanwhile, Circle filed for an IPO at the start of this month. With the stock market volatility following the recent sanctions announcements, the timing remains uncertain.
