In a significant development for USD Coin (USDC), Coinbase and Circle, the two companies behind the stablecoin, have reached a new agreement that brings changes to its governance and funding.
This move comes at a crucial juncture as USDC faces evolving global regulatory challenges and intensifying competition from other stablecoins, including Tether and the recently announced PayPal stablecoin (PYUSD).
According to a Fortune Magazine report, the updated agreement involves Coinbase acquiring an equity stake in Circle for the first time and the closure of the Centre Consortium, which previously governed USDC.
Coinbase And Circle Revamp Governance For USDC
Under the previous revenue-sharing arrangement, Coinbase and Circle split revenue based on the amount of USDC distributed and held on each platform.
However, per the report, with the new agreement, revenue will still be divided according to the USDC held on each platform, but interest income from off-platform USDC, such as in Decentralized Finance (DeFi) wallets, will be equally shared.
This shift aims to prioritize the overall success of USDC rather than focusing solely on the originator of the minted tokens.
Circle CEO Jeremy Allaire expressed satisfaction with the revised arrangement, emphasizing its fairness and creating a solid alignment for long-term success.
While specific figures regarding Coinbase’s equity investment were not disclosed, Allaire referred to it as a “small, minority equity stake.”
Moving forward, Coinbase and Circle will focus on driving USDC’s growth. Challenges have emerged, such as the temporary loss of USDC’s $1 peg when $3.3 billion of its reserves were trapped in a failing bank.
While the stablecoin recovered after government intervention, its market share declined, with Tether gaining prominence. Currently, USDC’s market cap stands at approximately $26 billion, while Tether’s market cap nears $83 billion.
As USDC navigates the evolving stablecoin landscape, the revamped governance and funding structure driven by Coinbase and Circle seeks to bolster its adoption and retain its position as a leading stablecoin option in the market.
Featured image from iStock, chart from TradingView.com