Coinbase Acquires Equity Stake in Circle

Coinbase acquires an equity stake in Circle, strengthening its alignment with the issuer of USDC stablecoin.

Aug 22, 2023 - 12:00
Oct 18, 2023 - 18:16
Coinbase Acquires Equity Stake in Circle
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In a significant move that signals a new collaboration and alignment in the cryptocurrency industry, Coinbase Global, the largest cryptocurrency exchange in the U.S., announced its acquisition of an equity stake in Circle Internet Financial, the issuer of the USDC stablecoin. 

Coinbase and Circle have a history of working together. In 2018, they founded the Centre Consortium, a jointly managed self-governance platform for USDC. However, the announcement of Coinbase's equity stake in Circle revealed that the consortium will dissolve, as all of Circle's governance and operations will remain in-house.

USDC has seen remarkable growth over the past five years, with its market cap soaring from $500 million to nearly $26 billion. It stands as the second-largest stablecoin in the world after Tether (USDT). The dollar-pegged token has become a significant player in the stablecoin market, competing with other major players like Tether.

Previously, Coinbase and Circle had an agreement to share revenue based on USDC holdings and each firm's statistics regarding minting and distribution. The new deal focuses less on the dealings of the partners and more on holdings, including those on third-party DeFi wallets. According to Circle CEO Jeremy Allaire, this change in the agreement, along with Coinbase's equity stake, creates a strong alignment for long-term success.

The exact size of the equity stake that Coinbase has purchased in Circle has not been disclosed. However, it is known to be a small minority stake, with Circle retaining control over the project.

Both companies have ambitious plans for the future. USDC will launch on six new, unidentified blockchains between September and October, bringing the total number of USDC-supported blockchains to 15. Circle also plans to continue upgrading USDC's capabilities, working on cross-chain capabilities and programmable wallets to make USDC more attractive for developers.

Coinbase's announcement emphasized that the investment means that Coinbase and Circle will have even greater strategic and economic alignment on the future of the financial system. They will generate revenue from interest accumulated on USDC reserves, sharing this revenue based on the amount of USDC held on the two platforms. They will also equally share income on interest generated by the distribution and use of USDC.

Philip Bohmer Philip is a seasoned journalist that brings clarity to the complex world of cryptocurrencies through his articulate and insightful articles. His passion for blockchain technology fuels his writing, making him a trusted voice in the rapidly evolving digital currency landscape.