Coinbase Invests in USDC Stablecoin: Big Changes Ahead!

By Kevin • August 24, 2023 5:25 pm • Comments

Coinbase, a prominent cryptocurrency exchange, is acquiring a stake in Circle, the issuer of the USDC stablecoin, signaling a closer relationship between the two industry giants.

The move also involves the closure of the Centre Consortium, a private governance body for USDC, due to newfound “regulatory clarity” on stablecoins.

This strategic move showcases Coinbase’s belief in the significance of stablecoins for the broader crypto economy.

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By taking an equity stake in Circle, Coinbase and Circle will have stronger alignment on the future of the financial system, particularly in relation to the success of the stablecoin ecosystem and USDC.

CNBC reports:

Cryptocurrency exchange Coinbase is taking a stake in Circle, the issuer of the USDC stablecoin, signifying a closer relationship between the two crypto heavyweights.

The two companies also said they will close down the Centre Consortium, a private governance organization for USDC, as they now see “regulatory clarity” on stablecoins.

“Reflecting Coinbase’s belief in the fundamental importance of stablecoins to the broader crypto economy, Coinbase is taking an equity stake in Circle,” Coinbase said in a blogpost Monday.

USDC encountered a challenge in March when it fell below its peg after the collapse of Silicon Valley Bank, a significant tech industry lender.

However, it rebounded after U.S. regulators intervened, taking control of SVB’s deposits and restoring customers’ access to their funds.

Circle, a key player in the $124.1 billion stablecoin market, introduced its U.S. dollar-based stablecoin in 2018. USDC constitutes about 21% of the entire stablecoin market, with over $26 billion worth in circulation.

While Tether holds the largest market share, Circle’s USDC has established itself as a significant player.

Circle initially established the Centre Consortium in 2018 to guide policy considerations surrounding stablecoins, a crucial part of the crypto landscape.

Now, Circle and Coinbase are consolidating their efforts, with Circle remaining as the USDC issuer, assuming all governance and operational responsibilities.

The collaboration will streamline operations and governance while heightening Circle’s direct accountability as the USDC issuer.

Watcher.guru reports:

“Coinbase and Circle will now have even greater strategic and economic alignment on the future of the financial system. Coinbase is committed to the long-term success of the stablecoin ecosystem and USDC, specifically.”

The press release also says that under the new arrangement, this revenue will continue to be shared based on the amount of USDC held on each platform. Additionally, Coinbase and Circle will equally share interest income generated from the broader distribution and usage of USDC.

Additionally, USDC is set to expand its presence by launching on six new blockchains between September and October.

The move comes amidst increasing regulatory scrutiny on stablecoins following the collapse of terraUSD and regulatory comparisons to unregulated money market funds.

By uniting their efforts and expertise, Coinbase and Circle aim to bolster the stablecoin ecosystem’s longevity and growth.

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