Bitcoin Powerhouse Will Pull the Plug on Bitcoin | Wall Street Journal

Circle Internet Financial, one of the most heavily-funded digital currency startups, will no longer offer the ability to buy and sell bitcoins. Photo: Getty Images

The move, disclosed by the company Wednesday, is the latest indication that the financial revolution that bitcoin’s early developers had hoped to spark isn’t playing out as planned.

Bitcoin remains a closely watched virtual currency, and its value is rising rapidly. But it is still a niche product, often traded by speculators and investors who own it as a hedge against traditional government-backed currencies.

Meanwhile, bitcoin’s underlying technology, blockchain, is widely being studied in the financial services industry as a possible tool to make everyday banking and complex financial processes faster and easier.

Circle, backed by Goldman Sachs Group Inc. and venture-capital firms such as Breyer Capital and General Catalyst, says it will continue to use blockchain as a way to expand its fast-growing international payments business, which it hopes to integrate peer-to-peer money transfers into text, email and other digital messages.

The company’s mobile app, called Circle Pay, makes transfers in dollars, euros and pounds. Jeremy Allaire, the company’s chief executive and co-founder, says Circle remains committed to using blockchain, to facilitate money movements between individuals and across borders. The company plans to continue using bitcoin and other digital tokens behind the scenes to settle transactions in traditional currencies.

“Our vision has never been, let’s adopt a new currency,” said Mr. Allaire. He he said that bitcoin hasn’t evolved quickly enough to support everyday financial activities. “We want to realize overall consumer benefits without having to be a bitcoin buying-and-selling exchange.”

Circle says its blockchain-aided payments in traditional currencies have been growing multiple times as fast as its bitcoin payments.

“The story is one of essentially gridlock amongst core developers, while mainstream companies are using this technology,” Mr. Allaire said of bitcoin. “We’ve been deeply frustrated with that lack of progress, and we want to move it forward.”

Circle’s announcement comes less than a week after a federal court ruled that the Internal Revenue Service could serve digital-currency startup Coinbase with a summons seeking detailed information on customer transactions. Coinbase, which hasn’t been charged with any wrongdoing, said it would fight the “government’s sweeping request.”

Circle, which said it hadn’t received a similar letter, will partner with Coinbase for Circle customers who want to continue to buy and sell bitcoin. The price of bitcoin has risen in recent weeks, with some investors using it as a hedge against inflation, like gold.

This week, Circle also said it plans to release free software code, known as Circle Spark, that can be used by digital payments providers to meet various rules including anti-money-laundering regulations when transferring money via the blockchain. Circle believes that using blockchains is cheaper and faster than traditional rails, like bank transfers or card networks.

By releasing its software to the public, the company hopes to spur a global network of banks and fintech firms to use the blockchain to help move money across borders, and integrate payments with chatting and other digital activities. That could help Circle to emerge as a major competitor to payment apps like PayPal Holdings Inc’s Venmo or Zelle, a soon-to-be-released app operated by a network of big banks. Circle is initially partnering with apps in South Korea and the Philippines.

Circle is still small relative to Venmo and the banks, who are doing tens of billions of annual person-to-person mobile payments. Circle is on track for over $1 billion in transfers this year, and it is growing quickly. Its cross-currency transfers have grown 300% in the past six months.

Circle’s bitcoin volume, meanwhile, grew just 50% a year.