Crypto

KuCoin and Circle back Chinese yuan-pegged stablecoin in $10M round

Comment

High altitude view of Victoria Harbour, Hong Kong
Image Credits: guowei ying (opens in a new window) / Getty Images

Circle Ventures, the venture arm of the USDC issuer Circle, has invested in an offshore Chinese yuan-backed stablecoin project, CNHC.

It’s hard to overlook the timing and strategic significance of the tie-up. In a matter of several years, stablecoins have grown from a fringe category into a more than $130 billion market. These digital coins are typically backed by traditional assets like the U.S. dollar and are designed to offer a less volatile way to trade than, say, Bitcoin and Ethereum.

As the stablecoin industry booms, hierarchy starts to form, mirroring the traditional USD-dominated financial world. Currently, over 99% of the existing stablecoins are backed by USD, and CNHC represents one of the few attempts to challenge USD dominance in the blockchain world.

Circle itself has been facing troubles since March. It was hit first by Silvergate’s closure and later by Silicon Valley Bank’s implosion. News surfaced that the stablecoin issuer had held reserve deposits at both banks. Over the past week, USDC briefly depegged from its $1 target value.

It’s unclear how big a stake Circle Ventures has in CNHC, which is a Cayman Islands-registered, cross-border payment service provider. But the move to establish some presence in the East could be a good hedging bet for the Boston-based crypto startup.

CNHC’s latest funding round totals $10 million and was led by KuCoin Ventures, the investment arm of the fourth biggest crypto exchange in the world. IDG Capital and Circle Ventures were participating investors.

Crypto in Hong Kong

While the USD-dominated stablecoin world has matured and become closely regulated, the yuan-backed sphere has only begun to take shape. The movement is happening in Hong Kong, which has historically been the largest offshore yuan center.

In 2009, the city set up a yuan settlement scheme, paving the way for the gradual internationalization of the currency. This move was marked by the creation of the offshore currency CNH, with the ‘H’ standing for Hong Kong, to differentiate from the onshore CNY.

In the past few years, the city’s status as Asia’s financial hub has been shaken by geopolitical events. But there are signs that it is trying to restore investor confidence.

Most notably, it’s relaxing rules around crypto-based finance. In late February, the city proposed a series of rules that could allow retail investors to trade major cryptocurrencies like Ethereum and Bitcoin, a stark contrast to mainland China’s crackdown on all forms of crypto transactions.

CNHC’s namesake stablecoin was born to ride the region’s new wave of crypto regulations. The startup, which was founded in early 2021, is setting up its headquarters in Hong Kong.

“The development of regulated stablecoins is positive to Hong Kong as an international financial center,” says Curt Shi, founding partner of a new Hong Kong-based web3 venture capital firm Prodigital Future Fund. “Improved transparency and better investor protection are where Hong Kong is going, and I assume more traditional banks may join as issuers.”

USD alternative

As a 1:1 fully collateralized stablecoin backed by offshore Chinese yuan, CNHC needs approval from the Hong Kong Monetary Authority and is obliged to submit audit reports at the local government’s request, the company told TechCrunch.

The stablecoin issuer has also built up a trust structure to custody collateralized fiat currency and a framework for KYC (know-your-customer) and AML (anti-money laundering).

CNHC can be redeemed into fiat offshore yuan on the stablecoin’s platform. To convert into other currencies like USD, EUR and GBP, CNHC is working with partners in different countries.

CNHC is issued on Ethereum and Conflux, a blockchain that boasts speedy and low-fee transactions. Conflux is also one of a kind as it claims to be the only regulatory-compliant public, permissionless blockchain in China. The Chinese blockchain was planning to move its headquarters to Hong Kong, its co-founder said at an event in January.

Other crypto firms are also creating yuan-pegged stablecoins. In December, crypto billionaire Justin Sun’s blockchain Tron welcomed offshore Chinese yuan-pegged TCNH.

Founded in early 2021 by Jack Chou and Joy Cham, CNHC has been helping Chinese exporters collect payments from developing countries, where banking and other traditional financial institutions are underdeveloped, using stablecoins. In 2022, the company processed $40-50 million in monthly transactions via the USD-pegged USDT and USDC as well as the CNHC stablecoin.

Update: An earlier version of the story incorrectly said Conflux was backed by KuCoin.

Hong Kong shows desire to be crypto hub with new regulation

More TechCrunch

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

19 hours ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

21 hours ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI

Winston Chi, Butter’s founder and CEO, told TechCrunch that “most parties, including our investors and us, are making money” from the exit.

GrubMarket buys Butter to give its food distribution tech an AI boost

The investor lawsuit is related to Bolt securing a $30 million personal loan to Ryan Breslow, which was later defaulted on.

Bolt founder Ryan Breslow wants to settle an investor lawsuit by returning $37 million worth of shares

Meta, the parent company of Facebook, launched an enterprise version of the prominent social network in 2015. It always seemed like a stretch for a company built on a consumer…

With the end of Workplace, it’s fair to wonder if Meta was ever serious about the enterprise

X, formerly Twitter, turned TweetDeck into X Pro and pushed it behind a paywall. But there is a new column-based social media tool in town, and it’s from Instagram Threads.…

Meta Threads is testing pinned columns on the web, similar to the old TweetDeck

As part of 2024’s Accessibility Awareness Day, Google is showing off some updates to Android that should be useful to folks with mobility or vision impairments. Project Gameface allows gamers…

Google expands hands-free and eyes-free interfaces on Android