Aug 22, 2023

Cryptocurrency exchange Coinbase (COIN) is getting a minority stake in Circle Internet Financial and the stablecoin issuer is bringing issuance and governance of USDC completely in-house as the companies dissolve their Centre Consortium partnership.

Video transcript

Let's go over to coin base and talk about the Circle Consortium which is now being dissolved as Coinbase has garnered a or purchased a stake within Circle itself. Circle earlier this year uh actually sold some its stake to fidelity and Black Rocks coin based joins those two firms. Uh was his main. Well, I think Circle is really growing and they want coin base for the Ride Circle, of course, runs the US DC uh network. They're adding about six more blockchains for that crypto asset, which is quickly becoming one of the most important stable coins out there. Zach, I throw this one over to you. This is kind of cool to look back and think about like how the Circle Consortium worked. It did its job for a few years now. They're professionalizing a little bit more, putting it all under one hood and then coin base continues to have a stake in the company by purchasing a stake in Circle. Yes, I will correct you, sir. It was the center consortium, not the Circle Consortium. So the center consortium is the thing that's being nuked, I think. Um I, yeah, this is interesting. I mean, obviously the addition of additional blockchains stands out, right? Having native US DC on various layer one networks is pretty catalytic for a lot of these networks, right? You want to have that stable unit of account that you can use to zap around money uh natively on these chains rather than having to rely on a bunch of sort of like, you know, uh duct tape bridge situations. So um that I think is super notable, but I think also that there's clearly some interesting, I think behind the scenes here as to why um coin base wanted to, you know, get in on this a bit more actively, right? I think if you looked at the low to no interest rate environment that a lot of stuff took place in uh you know, in the last 34 years, suddenly these reserves are probably thrown off a good chunk of change sitting in some uh bank account somewhere, um you know, generating interest, generating returns, right? So I can imagine why Coinbase would want to be closer to that because it might represent um a decent uh business line, right circle. These are dollar backed uh stable coins, they're sitting in reserve somewhere, they're tokenized and then they're, you know, zoomed around the internet and then if you want to cash them out, you get that dollar back, right. So, um I think the business sort of the economics of being a stable coin issuer have certainly changed. Given the high interest rates uh that we see. So it's interesting that I would, I would imagine that that may have been sort of a catalyzing factor in this changed to the approach. Um And that's certainly interesting to, to see coin base be a bit more uh active in pursuing it. But yeah, I think probably the new Blockchain stuff will have the longest term ramification in terms of, again, maybe jump starting some of those ecosystems a bit further. Um But yeah, interesting business story as well here, I'd say Jen, what do you think? Well, I read this and this is complete speculation, but I read this and thought, you know, coin base has been working very closely with their lawyers very closely with their legal advisors on the suit that's brought against them by the SEC. There's a stable coin bill um that's, that's being debated on and I just, I feel like this is, you know, them looking at the industry, looking at the growth of the industry, the consortium was created in, I think 2018, I think that this is them seeing kind of where regulation is going and making their making us DC look like other stable coins that they think are going to make it. And maybe one of those is, is a US D paypal stable coin. It just feels like they are restructuring. They've looked at the end, they've seen how it's developing. They've heard what regulators are saying when it comes to stable coins and they are being flexible so that they can carry on uh with the product and, and again, bring it to more Blockchain. So that's, that's my speculation while reading this, I think this is a regulatory response that has been carefully thought through. Well, any last words on this one? Yeah, I'm just wondering about the funding side of these things. So Coinbase has a pretty good books in terms of like revenues, cash flows and debt on hand. Uh They did recently recently announce that they're raising about 100 and $50 million in debt, I think as of like August 8, that about 50 million of that secured. And I'm wondering if that was something to do with this. But there's, of course, right now, that's only speculated, we don't really know how they purchase this or how large is the stake uh within this whole um, new purchase was. So that'd be something I'd be curious about knowing coin base. Of course, just a huge company at this point and they have stakes in so many different business lines, very professionalized company. Uh But I'd be curious about the money side of things, Zach and the, they just keep on checking on. I have to say it every time we talk about coin base, despite this lawsuit, they keep moving forward and doing what I think is like really great things for the industry. So they are leading the charge. It's gonna be less confusing when writing up stable coin stories because you always kind of had to mention like center. But it was sort of like, it wasn't really key to the story. So it is nice. It'll be nice, like simplistic because, you know, center was circle and coin base and now it's like, let's get rid of that. We're just, yeah, just, just straight up circle. Now, that's great.

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