Circle Internet Financial, the company responsible for the second-largest stablecoin, USD Coin, has announced its plans to move its legal base from Ireland to the United States. This decision comes as cryptocurrency regulations in the United States are becoming more stringent. According to Bloomberg, the company has filed court paperwork for the move, although the specific reasons have not been disclosed. This move is in line with Circle’s recent steps towards going public, as it submitted plans for an IPO confidentially in January.
The relocation of Circle’s legal base to the United States will result in higher tax rates, unlike Ireland, which has lower corporate taxation levels. However, the benefits of lower tax rates are being reduced due to global tax reforms led by the Organization for Economic Cooperation and Development (OECD). The OECD Global Anti-Base Erosion Rules, which were approved in October 2021, impose a minimum of 15% tax on multinational enterprises’ profits globally.
Tether, the largest stablecoin issuer, has frozen billions of dollars of assets related to hacks, exploits, and scams. Tether CEO Paolo Ardoino stated that the firm has blocked over $1.3 billion since its launch, with approximately $1.6 million linked to terrorist financing. Tether has also added various Ethereum addresses and USDT amounts to its blacklist due to suspicious activities.
Moving back to the United States could subject Circle to a new regulatory framework and scrutiny from the Securities and Exchange Commission (SEC). As Circle plans for an IPO, it would need to comply strictly with securities laws and face the challenges of SEC regulations, as seen in 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 for regulatory compliance in the United States and to maintain investor confidence. While compliance-related costs may be higher in the US, it offers increased transparency and a higher chance of adoption.
Circle’s IPO, following in the footsteps of Coinbase, could give USDC an advantage over its main competitor, Tether (USDT), in the stablecoin market. Enhancing regulatory compliance could solidify USDC’s position in the market, especially after surpassing USDT in monthly transactions in December 2023. Circle CEO Jeremy Allaire has expressed his belief in a decentralized financial system, and these strategic moves by Circle align with his vision.
In summary, Circle’s decision to relocate its legal base, launch an IPO, and uphold regulatory compliance demonstrates a strategic approach to aligning with Jeremy Allaire’s vision of a decentralized financial system. Despite these efforts appearing disconnected, they all contribute to Circle’s overall strategy of achieving regulatory compliance, securing capital through going public, and strengthening operational capabilities.