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Where does the FTX debacle leave Boston’s biggest crypto company?

The digital economy needs ‘sensible regulation,’ Circle says.

FTX, the cryptocurrency exchange founded by Sam Bankman-Fried, filed for bankruptcy last week.Leon Neal/Photographer: Leon Neal/Getty Im

A bad year for crypto turned into a rout with the bankruptcy of digital currency exchange FTX. The collapse has shaken confidence in crypto markets and sent the price of bitcoin to the lowest level since 2020.

FTX, valued at $32 billion earlier this year, was founded by Sam Bankman-Fried, an investor who appeared on the cover of Fortune magazine as possibly “the next Warren Buffett” in August. On Nov. 11, the firm filed for bankruptcy protection, and Bankman-Fried resigned as chief executive. Billions of dollars’ worth of customer deposits may be lost.

Where does that leave the largest crypto startup in Boston, Circle Internet Financial? Bruised, but not battered.


Though FTX and Circle both deal in cryptocurrencies, their businesses are quite different.

Circle’s main product, called USDC, is known as a stablecoin. USDC is a digital token that can be traded on blockchains, but its value is backed by standard financial assets such as Treasury bills and bank deposits. Unlike bitcoin or most other digital currencies, the price of USDC sticks at $1, thanks to the value of the assets. At the end of September, Circle held $47 billion of assets backing an equivalent amount of USDC.

Circle, headquartered in Boston, is also subject to several kinds of regulation, including as a state money transmitter and as a “money services business” with the Department of Treasury’s Financial Crimes Enforcement Network.

“When people say crypto is unregulated... I take a little bit of umbrage on behalf of the many regulators and many examiners who review our business to ensure that we are conforming with licenses to operate,” says Dante Disparte, Circle’s chief strategy officer.

Many of the activities of FTX and its related entities occurred outside the US, beyond the reach of regulators. And FTX issued digital tokens that were connected with specific projects but not backed by any assets in trust. The Serum token, for example, was created to help FTX offer new ways to trade popular digital currencies. Now, the value of Serum has dropped by more than 90 percent since January.


Still, the collapse of crypto markets could injure Circle. Most directly, the company will probably have to write off almost $11 million it invested in FTX as venture capital backing.

Its USDC business could also suffer. The ultimate goal of Circle is for USDC to be used in ordinary financial transactions all over the world: On Tuesday, it announced a deal allowing businesses using Circle to accept Apple Pay.

But right now, many USDC users are crypto investors and traders. As they lose money or decide to get out of the market, there will be less use of USDC. The total amount of USDC in circulation shrank by $8 billion over the summer, as the prices of many crypto tokens started falling.

Ultimately, the company hopes that crypto markets evolve as mutual funds did a century ago. After thousands of trusts went bust in the Great Depression, Congress enacted laws regulating funds and ignited a booming industry.

“Hopefully, on the other side of the FTX debacle, calls to action that there might be risks and other systemic issues in the digital economy will finally be met with sensible regulation,” Disparte says.

Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him @ampressman.