TL;DR
- Coinbase acquired an unknown amount of equity stake in Circle Internet Financial. Circle is the issuer of the popular stablecoin USDC.
- New blockchains could integrate USDC in the near future. The list includes projects like Polkadot, Near, Optimism, and Cosmos.
Coinbase purchases minority stake in Circle
The popular crypto exchange Coinbase purchased a minority stake in Circle Internet Financial.
As a result of the move, the companies will dissolve the Centre Consortium. This is the issuer of the USDC stablecoin, a cryptocurrency project with a $25 billion market capitalization.
Moving forward, Circle will handle USDC issuance and governance in-house. The information available on the web does not specify how big the stake was purchased by Coinbase.
What we know is that Coinbase didn’t commit cash to buy the stake, so we can speculate on the transfer of equity.
Coinbase Global Inc is the only cryptocurrency exchange listed on the Nasdaq stock exchange. As a result of this year’s recovery in crypto, the COIN stock is up 124% YTD.
Since it holds a leading position in the industry, it has the potential to further consolidate by buying stakes in other companies.
New blockchains with native support for USDC?
Users of USDC should benefit from the latest transaction. It turns out several new projects could gain native support for the stablecoin.
There is no concrete information on this topic at this point. However, Circle mentioned in the past it wants to add Polkadot, Near, Optimism, and Cosmos to the list.
USDC already supports popular blockchains. The list includes Algorand, Avalanche, Ethereum, Flow, Hedera, Solana, Stellar and TRON.
If the move materializes, the number of supported blockchains will increase to 15. Stablecoins are preferred among retail users and businesses wanting to settle transactions. This is a good decision, especially when legacy crypto like Bitcoin or Ether are volatile.
According to Coinbase, using USDC goes beyond cryptocurrency trading. Foreign exchange, cross-border payments, and financial inclusion represent other applications.
Could USDC stage a recovery?
The Coinbase acquisition comes at a time when the USDC userbase is falling. As the chart below shows, the market capitalization fell from $50 billion to $25 billion. The 50% move happened in less than a year.
Additionally, USDC lost confidence when its value de-pegged from the US Dollar. Although stablecoins share a higher stability, liquidity is important to ensure their valuations do not deviate from the peg.
People and companies interested in using stablecoins have plenty of options. Tether (USDT) leads with an $82 billion market capitalization. DAI, Binance USD, and TrueUSD are other competitors with a lower market share.
The crypto market is far below the peak seen in 2021. As a result, companies with a dominant position are taking measures to attract more clients. Yesterday, we saw how OpenSea altered NFT royalties, given the low interest in digital art.
Does Coinbase believe demand for stablecoins will increase faster in the future? That could be the case since volatile crypto prices are not a solid ground for building long-lasting businesses.
Suchet Salvesen
Suchet is a Norwegian economist, entrepreneur, and investor, serving as the CFO and COO of Brainfund. With over a decade of experience in global expansion, venture capital, and emerging technologies, he earned his MBA from the NMBU School of Business & Economics. He held dual bachelor's degrees from the University of South-Eastern Norway. His career spans roles at NextToMe, Get, and Conax before joining Everipedia, now Brainfund, in 2017.
