Barclays is known for championing new technology
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Circle, the leading
digital payments company which uses the blockchain as a settlement rail,
is launching a social payment app in the UK with the help of Barclays.
It's the first time the Financial Conduct Authority has granted an
E-Money Issuer license to a consumer Internet firm for cross-border
payments with blockchain technology.
Circle said the app, which will be available on iOS and
Android, will allow UK consumers to send and receive cross border
payments with instant conversion between pound sterling and US dollars
with zero fees, and that euro and other currencies will follow.
Circle formed a strategic commercial partnership with
Barclays to launch in the UK but stressed, the bank is not distributing
the product or making it available to Barclays customers; rather it is
providing Circle with underlying capabilities to hold sterling for its
own consumers via any bank account in the UK.
Circle has always held the belief that transferring money
using the open internet as a payment rail should be as easy as sending
email or other web content. The company is focused on social payments –
exchanges of money between friends and family which has exploded in
China, where some 500 million users do payments using apps like Alipay
and WeChat.
It should be said, Circle and some other well-known
companies doing transactions in bitcoin and providing wallets, have
received a bit of stick about pivoting away from the iconic
cryptocurrency.
Sean Neville, co-founder of Circle told IBTimes: "When
Jeremy and I founded the company we were very excited about bitcoin
because it enabled us to deliver the product that we wanted to deliver
to everyone. We always intended it to be in the background.
"We didn't think it was necessarily something that most people would
want to hold; they get paid in sterling or euro or dollars and they pay
their friends and their bills in those currencies.
Those
currencies may need to convert to bitcoin and use blockchain but people
don't necessarily need to be aware of it. So that's what we are
delivering today."
Neville explained that when Circle started out they didn't
have the licences that are required if you want to deliver fiat money
around the world. "To oversimplify a little bit, the decision was more
or less, do we go into stealth mode for the two years it takes to
acquire licences to work with existing financial system, or do we
release what we can release, which at the time was an unregulated
technology; bitcoin.
"We decided to do that so we gained some operational
readiness and operated a treasury and got a product in consumers hands
so that we could begin to learn from them and all of those good things,
while we acquired the licences to ultimately deliver the product that we
intended to deliver all along."
Circle co-founder Jeremy Allaire talked through the sorts of
transactions which can be expected with the social app. He said the app
is not primarily a cross-border remittance service, but is aimed at
relative low value transactions at high frequency between family,
friends and colleagues etc. He added that it uses the Bitcoin blockchain
because it's the only one that actually works, that has scale, security
and liquidity so that you can move value in and out of it.
"We are not religious about that. This is a suite of
protocols that we integrate under the hood to enable people to transmit
value, and as other public blockchains emerge like Ethereum or future
generations of bitcoin that may not even be called bitcoin, we will of
course take advantage of those."
Allaire said a transaction between two consumers that both
have Circle accounts sending money from UK to US, for example, probably
won't touch the blockchain, "that will just happen inside of circle's
own treasury, inside of our own database in a sense. We are converting
sterling to dollar out of reserves of those currencies that we have in
our systems and make that available instantly to the counterparty - like
the equivalent of an instant message".
He said consumers can also pay businesses that use a third
party payment processor over the blockchain, but one that has nothing to
do with circle, using QR codes and bitcoin addresses. He said in this
case Circle instantly converts sterling into Bitcoin, transmits it and
settles that transaction over the blockchain. This example could also be
a cross border remittance – someone wanting to send money from UK back
their family in India would plug into a service like Unacoin in India.
Regarding the instant settlement capabilities of the system
Allaire said all types of transactions are covered by currency held in
reserve in sufficient amounts by Circle to handle flows that cross
currencies – sterling, dollars and bitcoin.
Holding currency reserves, doing the instant transfers, and
charging zero fees for the trouble doesn't appear to have an obvious
revenue model. Neville said: "In the near term we aren't optimising for
revenue at all. In the longer term we have ideas about revenue
generating services and features that we may add, but that's two or
three years from where we are focused on today.
"We believe that holding money for someone which is just
incrementing a number in a database, just debiting and crediting that
database and making a payment, should just be free. In the same way as
sending content over the internet is free."
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