According to Coinbase’s post on August 22, the cryptocurrency exchange and the issuer of USDC Circle have reached a strategic agreement to “unlock additional utilities and grow the USDC ecosystem.”
Coinbase reportedly invested in Circle Internet Financial, the firm behind the second-largest stablecoin. While the exact value of the deal remains undisclosed, this partnership promises to reshape the landscape of stablecoins and how they are managed.
More Support for USDC
Center Consortium, a member-based consortium founded by Coinbase and Circle handling governance and issuance of USDC, will be dissolved as part of the agreement. With this dissolution, Circle is now in complete control over the supply, issuance, and management of USDC.
“The new structure will streamline the operations and governance, and enhance the direct accountability of Circle as the issuer, including holding all the smart contract keys, complying with regulations on governance of reserves and enabling USDC on new blockchains.”
Additionally, both companies have agreed to collaborate on sharing profits generated from holding collateral for USDC. The allocation of profits is determined based on the quantity of USDC each entity holds.
In addition to the highlighted partnership, Circle revealed its plans to integrate USDC onto six new blockchains in September and October 2023. USDC has already established its presence on blockchains such as Algorand, Arbitrum, Avalanche, Ethereum, Flow, Hedera, Solana, Stellar, and TRON, with a total circulating supply of $26.1 billion.
The expansion is expected to make USDC more accessible to users across a broader spectrum of platforms.
Coinbase’s strategic investment in Circle is a resounding vote of confidence in USDC. It reflects Coinbase’s belief that USDC is not only a secure and dependable stablecoin but also a pivotal player in the cryptocurrency market’s future.
The profit-sharing agreement ensures that Coinbase and Circle are mutually invested in upholding the stability and credibility of USDC, which bodes well for the coin’s users and the broader crypto market.
Stablecoin Competition Intensifies
Coinbase stated that the growing regulatory clarity was the reason behind the company’s latest investment in USDC.
Stablecoins are becoming increasingly regulated, which could make them a more attractive option for big corporations that need to comply with regulations. PayPal, the world’s payment giant, recently debuted in the stablecoin sector by introducing its own stablecoin, PYUSD, built on Ethereum.
The stablecoin competition has intensified as more entities seek to take the share. Currently, the top five stablecoins are USDT, USDT, DAI, BUSD, and TUSD. Last year, the stablecoin landscape hit a roadblock with the shocking collapse of stablecoin terraUSD (UST). The event raised concerns over whether stablecoins are truly stable as they’re called.
However, stablecoins are now becoming increasingly regulated worldwide, which could make them a more attractive option for big corporations that need to comply with regulations.
Tether (USDT), the world’s leading stablecoin, reported a profit of more than $1 billion in the second quarter of this year. This figure presents a 30% increase in comparison to the previous quarter. However, the company did not disclose details on how the interest was calculated. The huge profit came from Tether’s investment in US Treasury bills.
Tether’s Q2 was a mixed bag. Tether faced a new round of negative news in June when documents from its 2021 lawsuit against the New York state government were released.
The documents showed that Tether had previously held large amounts of commercial paper issued by Chinese companies. This raised concerns about the quality of Tether’s reserves and its ability to maintain its peg to the US dollar.
Earlier this month, Tether said it would no longer issue stablecoin on Omni, Bitcoin Cash, and Kusama, citing the lack of necessary strategies for long-term use of the coin on these blockchains. Users can cash out USDT on Omni, Bitcoin Cash, and Kusama within 12 months.