Circle Internet Financial, the company responsible for USD Coin (USDC), the second-largest stablecoin in the world, has announced its plans to move its legal base from Ireland to the United States. This decision comes as a result of the tightening cryptocurrency regulations in the US. While the specific reasons for the move have not been disclosed, Circle’s recent move towards going public through an initial public offering (IPO) aligns with this decision.
Moving its legal base to the US would mean that Circle would be subject to higher tax rates compared to the reduced corporate taxation in Ireland. However, the benefits of lower taxation in Ireland are being reduced due to global tax reforms led by the Organization for Economic Cooperation and Development (OECD). These reforms include the implementation of the OECD Global Anti-Base Erosion Rules, which impose a minimum tax rate of 15% on multinational enterprises (MNE) profits globally.
In other news, Tether, the largest stablecoin issuer, has frozen billions of dollars of assets that were linked to hacks, exploits, and scams. Since its launch, Tether has blocked more than $1.3 billion, with approximately $1.6 million related to terrorist financing. The stablecoin issuer has taken action by blacklisting Ethereum addresses holding more than $150 million worth of USDT and freezing $8.2 million in USDT on Ethereum, as well as adding 215 Ethereum-based USDT addresses to its blacklist. In total, Tether has frozen over $360 million in assets, including $817,000 linked to terrorist activity in Ukraine and Israel, and $225 million linked to romance scammers. Tether has also collaborated with 24 law enforcement agencies across more than 40 countries, responding to 198 requests to block wallets in the last 12 months and 339 in the last three years.
Moving its legal base back to the US could expose Circle to a new regulatory framework and scrutiny from the Securities and Exchange Commission (SEC). As Circle plans for its IPO, it would need to comply with securities laws and navigate the challenges posed by SEC regulations. Despite the successful IPO launch of Coinbase in April 2021, the regulatory battle continues, as evidenced by the ongoing Coinbase-SEC lawsuit.
Circle’s main focus is its stablecoin, USD Coin (USDC), which currently has a market cap of nearly $33 billion. The decision to relocate is driven by the need to comply with US regulations, which in turn helps maintain investor confidence. Although compliance-related costs may be higher in the US, the benefits include increased transparency and a higher likelihood of adoption.
Following the footsteps of Coinbase, Circle’s IPO could give USDC a competitive advantage over its main competitor, Tether (USDT), especially with the increase in regulatory compliance. This move could solidify USDC’s position in the stablecoin market, especially after surpassing USDT in monthly transactions in December 2023. Circle’s CEO and Co-founder, Jeremy Allaire, has expressed his belief in a decentralized financial system, stating that the future of the “Internet Financial System” will not be limited to closed government networks.
In summary, Circle’s decision to relocate its legal base to the US, pursue an IPO, and align with Allaire’s vision of a decentralized financial system all contribute to its strategic angle. Despite appearing disconnected, these moves demonstrate Circle’s commitment to achieving regulatory compliance, securing capital through going public, and enhancing operational capacities.