Goldman Sachs has shown signs of interest in digital currency technology by established financial institutions. Now the interest has been confirmed with the company investing $50 million on the bitcoin startup Circle Internet Financial Ltd., through a fundraising round.
Boston-based startup Circle makes use of systems that are bitcoin-based to let its users to save digital currency and exchange it between people and merchants. It recently announced the unveiling of the app that permits its customers to transfer US dollars without any charge. The core about this feature is that reaps the perks of Bitcoin’s promise in completing transactions and getting consensus at a much lesser cost than traditional online financial transactions.
Bitcoin’s public ledger, the blockchain, allows various parties to transact currency to each other without the involvement of the third-party. The blockchain is a public ledger where cryptocurrency transactions are validated and recorded.
Circle’s new fundraising through the round led by Goldman Sachs and China focused venture capital firm IDG Capital Partners, to help fund its expansion beyond bitcoin and other currencies. Goldman’s commitment to Circle follows investments by the New York Stock Exchange, Spain’s Banco Bilbao Vizcaya Argentaria SA and USAA Bank in San Francisco startup Coinbase that operates a bitcoin exchange and is a rival of Circle in the market for digital currency.
The company was valued around $200m before the new money, now the new fund adds as cake topper to $26m of venture capital raised over the past two years. Other investors of the company include Jim Breyer’s Breyer Capital, Oak Investment Partners, Accel Partners and General Catalyst, which played a major role in the recent investment.
The startup plans to use the newly raised fund for product development and expansion of the business globally. The fund will also be used to market the new feature of the Circle. The new feature is expected to lead the company into an international money-transfer market. There are also plans for the company to enter the Chinese currency by making a move on Chinese yuan. There is already a similar bitcoin exchange that is Beijing based and called OKCoin. This company is unveiling a ‘Superwallet’ for storing yuan and other currencies, allowing the user to make purchases in other countries through the funds available through bitcoins.
Bitcoin is not free from competition, it has its own rivals in the market. It has many third-party and more centralized institutions that have popped up to serve as wallets, exchanges and merchant processors. But Circle with its new feature is bidding that dollar-based transactions will also pull in attention of users who is not interested to deal with Bitcoin’s price fluctuations against fiat currencies. Jeremy Allaire, the entrepreneur of circle said, “They can do this without knowing anything about Bitcoin and without exposing themselves to price volatility. We really think of Bitcoin as a global interoperable payment network instead of a store of value.”
Tom Jessop, managing director at Goldman Sachs said, “As the financial services industry continues to become more digital and open, we see significant opportunities in companies and solutions that have the promise to transform global markets through technical innovation” in a statement in the blog.