Circle to upgrade stablecoin custody infrastructure in push for mass adoption

Emboldened by the momentum of collateralized stablecoins across the market, Circle invests in custody and security infrastructure for USDC.

Visualisation of a padlock made up of weaving threads

The crypto company behind USDC stablecoin, Circle, announced it was acquiring Cybavo, a development firm specializing in security and custody solutions for digital assets. While the deal has not yet been closed, the agreement is final.

Neither company disclosed the price it had negotiated.

Circle intends to leverage the solutions developed by Cybavo and turn them into a new product pillar for USDC holders. At the same time, the company hopes that Cybavo’s input will help developers deliver better results by improving the underlying security and blockchain infrastructure.

Cybavo sought to present the news in terms of partnership rather than acquisition, stressing that existing services would still be supported.

“Over time, we will leverage Circle’s technologies and abundant experience to enhance existing functionalities and deliver new product offerings,” the company said in a statement, adding that they were “very optimistic about the future.”

Behind the scenes

Cybavo currently operates an infrastructure-as-a-service business model, with Vault, an institutional crypto wallet and digital asset management platform that uses enhanced security measures, as the flagship product. For retail crypto customers, Cybavo offers a wallet mobile app and an Ethereum 2.0 staking platform.

It remains unclear which of those products would become part of Circle's new pillar, and whether any would continue to be provided under the existing brand.

Cybavo's institutional customers include crypto exchanges, NFT marketplaces, and crypto wallet providers, including Taiwan-based ACE trading platform and NFT marketplace Xtingles. In total, the company claims to have onboarded over 60 crypto enterprises.

Last year, the company raised $4 million in a seed financing round led by 500 Startups, with additional support from New Economy Ventures, H&D Asset Management Company, and Taiwan Startup Stadium. Cybavo is also a member of the Singapore Fintech Association.

Circle on a roll

The move could presage Circle's plans to expand the reach of USDC as the collapse of Terra boosted the crypto community’s confidence in collateralized stablecoins.

Just days ago, crypto companies like Circle or Tether were further emboldened by the freshly released draft of the Responsible Financial Innovation Act, which seeks to promote stablecoins fully backed by cash or highly liquid assets as “faster, more secure means of payments” than the dollar.

The draft eased the concerns expressed by many as SEC Chair Gary Gensler and US Treasury Secretary Janet Yellen hinted at the possibility of introducing more robust stablecoin regulations following the meltdown of Terra.

While the acquisition of Cybavo could well have begun before the mood in the crypto community shifted in favor of collateralized stablecoins like USDC, Circle has every right to feel confident.

Earlier this year, the company announced it had reached a deal with BNY Mellon, the largest custodian bank in the world, making it the primary custodian for the USDC reserves. According to Circle, all of its reserve assets are either in cash or cash equivalents.

The acquisition of Cybavo also sets the stage for Circle’s conference, Converge22, scheduled for September in San Francisco. The event is expected to bring together crypto natives, Web3 entrepreneurs and developers, as well as TradFi leaders, policymakers and NGOs.