Cryptocurrency trading platform Coinbase and USDC stablecoin maker Circle announced a revamped relationship yesterday, in a move that could prove decisive for the future of the second most popular stablecoin after Tether (USDT).

Recall that the two companies jointly launched the USD Coin in 2018 and until now managed the token through the Center Consortium.

A decision motivated by the progress of stablecoin regulation

Now, Coinbase will take an undisclosed stake in Circle, and the Center Consortium “will no longer exist as a stand-alone entity,” according to a statement posted on the Circle and Coinbase blogs. which also specifies that governance and operations will be managed internally.

In effect, Circle will see its responsibilities expanded, including with respect to smart contract key holdings and regulatory compliance.

To explain the move, Coinbase and Circle advanced the progression of stablecoin regulation, pointing out “that with increasing regulatory clarity for stablecoins in the United States and around the world, the requirement for a separate governance body like the Center, is no longer needed.”

In a comment on Twitter, Jeremy Allaire, co-founder and CEO of Circle, said that “two of the biggest and most important regulated players will work hard to make USDC the most widely used digital dollar in the world. 

In this regard, it should be noted that there is still a long way to go, knowing that the capitalization of the USDC is currently 26 billion dollars, while that of the leader of stablecoins, the USDT, is nearly 83 billion. of dollars.

A better strategic alignment to face the competition from Paypal’s stablecoin?

“The nature of the investment means that Coinbase and Circle will now have an even greater strategic and economic alignment on the future of the financial system,” Brian Armstrong, CEO of Coinbase, said in the statement, which also specifies that interest income will continue to be split between the two companies in proportion to their stablecoin holdings.

It should also be noted that Circle and Coinbase also announced that USDC will be launched on six new blockchains, which were not named in September and October, knowing that USDC is already planned to integrate soon on Polkadot, Optimism, Near, Arbitrum, and Cosmos.

It will also be recalled that this change in the management of the second largest stablecoin in the world comes shortly after the online payments giant Paypal launched its own stablecoin, the Paypal USD, with the help of Paxos.

However, Phil McDonnell, a senior executive at Coinbase, refuted to Coindesk that the merger of his company with Circle aims to strengthen their position against Paypal, not considering his stablecoin as a threat, believing that the arrival of Paypal in the crypto landscape is making the pie bigger.

Indeed, he believes that “by getting a lot of people in, whether they come through PayPal’s door or some other door, a lot of them will eventually find their way to other things in crypto, including us at Coinbase.”

Tags: Coinbase
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