Coinbase and Circle intend to get into other institutional deals in addition to rolling out the stablecoin in additional jurisdictions and on additional blockchains.

The end of the CENTER consortium.

What's new on the horizon for the USDC? This past week, we discovered that Coinbase would soon become a minority shareholder of Circle, which is the company that issues stablecoins. In the meantime, Circle is going to assume complete governance management of USDC.

After the present consortium that is leading USDC (CENTRE) has been destroyed, Coinbase will acquire a stake in the venture.

A major but declining stablecoin.

To refresh your memory, Coinbase and Circle made the announcement on the development of the USDC and the consortium that will manage the stablecoin in the year 2018. After a slow start, the supply of USDC eventually surpassed one billion dollars about two years after its inception.

The "DeFi Summer" and the rise in the number of protocols offering attractive returns on decentralized finance were both contributors to the initial growth spurt that USDC experienced in terms of its usage.

When the bear market took hold, its rapid expansion, which had taken supply to about $50 billion in 2022, began to decline. This was due to the bear market. Following that, additional decreases were observed after a parity loss incident that occurred in the spring of last year.

Despite this, USDC has not budged from its position as the second-largest stablecoin on the market. In spite of everything, the USDT is increasing its lead and strengthening its position as the dominant currency.

The percentages of the total cryptocurrency market that are held by each of the several stablecoins (source: The Block Data).

Major revenues for Circle and Coinbase.

Due to its prominence as a standard-setting stablecoin, Coinbase and Circle rely heavily on revenue generated by USDC transactions. During the first six months of 2023, Circle reported a total revenue of $779 million.

During this same time period, Coinbase has reported interest-related revenue of 201.4 million dollars for the second quarter of 2023. When compared to the total revenue of $32.5 million generated in the second quarter of 2022, this is a significant improvement.

Both businesses see the USDC to be a really fascinating opportunity. The newly reached agreement stipulates that the companies would divide earnings in proportion to the total quantity of USDC that is mined or disseminated.

The original strategy of the consortium made sense in a cryptocurrency market that was considerably smaller and had more competition. At this point, the revenues are far too high to be distributed in order to produce marginal gains from additional players lobbying for an expanded adoption of the stablecoin.

It's not certain that this decision was made at the right time. Some commentators believe that the entry of the massive online payment service PayPal into the competition for stablecoins is not unrelated to this move. Circle and Coinbase are attempting to resuscitate the stablecoin in part because the USDC has been seeing a modest but significant decrease in value. This is undoubtedly one of the reasons why.