Coinbase Invests in Circle, Expanding USDC Stablecoin to 6 New Blockchains

Coinbase continues to bolster support for Circle's USDC stablecoin, both financially and in terms of market coverage within the cryptocurrency sector.

Coinbase Invests in Circle, Expanding USDC Stablecoin to 6 New Blockchains. Photo: Circle

In an announcement made on the evening of August 21 (U.S. time), leading U.S. cryptocurrency exchange Coinbase has entered into a strategic investment agreement with Circle Internet Financial, the company behind the second-largest stablecoin in the market, USDC.

However, both parties have not disclosed the specifics of the investment deal.

The agreement between the two sides involves dissolving the Centre Consortium, a joint venture established between Coinbase and Circle to manage USDC issuance operations. Instead, Circle will now have full control over the supply and coordination of stablecoin creation and redemption.

Coinbase and Circle have also agreed to share profits derived from the collateral assets for USDC, based on the amount of USDC held by each company. Similar to other major centralized stablecoins like Tether (USDT), Circle generates revenue from USDC by investing collateral assets in safe and highly liquid channels such as U.S. Treasury bonds, taking advantage of the Federal Reserve's recent rate hikes to the highest levels in decades.

In its Q2 2023 operational report, Coinbase reported a profit of $151 million USD from USDC interest, a significant decrease from the previous quarter's $199 million USD, attributed to the shrinking USDC market capitalization amid the U.S. banking crisis in March.

According to the asset verification report as of June 2023 conducted by auditing firm Deloitte, Circle holds $27.4 billion USD in assets to collateralize the 27.3 billion USDC issued into the market, with $24.7 billion USD in U.S. Treasury bonds and $42.6 billion USD in cash equivalents.

Additionally, Circle announced plans to expand USDC to 6 new blockchains in September and October of this year. While specifics were not disclosed, the company previously mentioned supporting USDC for Polkadot, Near, Optimism, and Cosmos. Coinbase's newly launched Layer-2 Base is also a feasible candidate.

Previously, Circle had issued USDC on blockchains including Algorand, Arbitrum, Avalanche, Ethereum, Flow, Hedera, Solana, Stellar, and TRON, with circulating supply totaling $26.1 billion USD at the time of writing.

Market capitalization changes of USDC from the beginning of 2023 to date. Source: CoinMarketCap (08/22/2023)

The stablecoin sector has witnessed significant fluctuations recently, with USDT depegging and USDC experiencing continuous market capitalization declines, alongside the emergence of PYUSD - PayPal's stablecoin in the global payment sector.

• Details: Updates on USDT - USDC - DAI - FDUSD - PYUSD stablecoins as of August 8, 2023

Moreover, several leading Wall Street financial firms are gradually re-entering the cryptocurrency market with proposals for Bitcoin spot ETFs and Ethereum futures ETFs, led by BlackRock.