USDC Stablecoin Issuer Circle May Sell Company to Coinbase or Ripple

Circle Internet Financial, the company behind the USDC stablecoin, has been navigating a pivotal moment in its trajectory. In early April, Circle filed paperwork to pursue a long-awaited initial public offering, signaling its intent to go public. However, recent developments suggest the IPO may not materialize as planned. According to four banking and private equity executives familiar with the matter, Circle has engaged in informal discussions about a potential sale to either Coinbase, the largest cryptocurrency exchange in the United States, or Ripple, a prominent player in crypto, and the company behind the XRP cryptocurrency. These sources, who spoke on condition of anonymity to Fortune due to the private nature of the talks, indicate that Circle is seeking a valuation of at least $5 billion, aligning with its IPO target.

The possibility of a sale has sparked intrigue in the crypto industry, given the intertwined histories and strategic interests of the parties involved. Circle remains committed to its IPO, with no set terms or roadshow launched as of yet. The discussions, described as fluid and subject to change, whoch show the dynamic nature of the crypto market, where strategic alignments can shift rapidly.

Strategic Ties and Financial Incentives

Coinbase emerges as a particularly logical suitor due to its deep ties with Circle. The two companies co-founded the Centre Consortium in 2018 to issue USDC, a stablecoin pegged to the U.S. dollar. When the consortium dissolved in 2023, Coinbase acquired an equity stake in Circle, while Circle took full governance of USDC. The partnership has proven lucrative, with both companies sharing revenue from interest earned on USDC reserves. Notably, Coinbase receives the entirety of this revenue when USDC is held on its platform, a factor likely contributing to its rising income from the partnership, as recent earnings reports suggest.

Beyond financial incentives, Coinbase holds significant influence over Circle’s operations, including veto power over new USDC distribution agreements and partial control over Circle’s intellectual property in case of insolvency. These provisions have led some industry observers to view Coinbase and Circle as closely aligned, with one source describing them as “one company” in spirit.

Ripple, meanwhile, has also entered the fray with a substantial offer. Reports indicate that Ripple previously proposed acquiring Circle for $4 billion to $5 billion, an amount deemed insufficient by Circle. Ripple’s financial position is bolstered by its holdings of XRP, the cryptocurrency it created, valued at over $100 billion as of March 31, including assets in escrow. A potential bid from Ripple would likely combine XRP and cash, leveraging its significant balance sheet. In contrast, Coinbase, with $8 billion in cash and the flexibility of a public company, could finance a deal through cash, stock, or additional fundraising methods such as debt issuance or share sales. Industry insiders suggest Coinbase’s public status gives it an edge over Ripple, despite the latter’s considerable resources.

The prospect of a sale comes at a time when Coinbase’s CEO, Brian Armstrong, has expressed openness to mergers and acquisitions. In a recent interview with Bloomberg, Armstrong highlighted Coinbase’s “pretty large balance sheet” and the advantages of its public company status, which recently joined the S&P 500, while emphasizing the importance of successful integration in any acquisition. He refrained from commenting directly on a potential Circle deal, noting only that Circle’s IPO plans do not alter their existing commercial relationship.