Circle Internet Financial – the company behind the second largest cryptocurrency – announced the announcement
Circle Internet Financial – the company behind the world's second-largest stablecoin, USD Coin – has announced its plans to move its legal base from the Republic of Ireland to the United States. This shift comes amid tightening cryptocurrency regulations in the United States.
According to Bloomberg, a Circle spokesperson confirmed on May 14 that the company had filed court papers for the move, but the specific reasons were not revealed.
The decision is in line with Circle's latest step toward going public — it confidentially filed plans for an initial public offering (IPO) through a brief press release in January.
Legal implications
In contrast to the lower levels of corporate taxation in Ireland, moving Circle's legal base to the United States would result in higher tax rates.
However, these benefits are being reduced due to global tax reforms led by the Organization for Economic Co-operation and Development (OECD).
After being approved in October 2021, the OECD's Global Anti-Base Erosion (GloBE) rules came into force, clamping down on multinational corporations and issuing a tax of at least 15% on multinational corporate profits globally.
Furthermore, a return to the US could subject Circle to a new US regulatory framework and scrutiny from the Securities and Exchange Commission (SEC).
In the wake of its IPO plans, Circle will need to adhere strictly to securities laws as it navigates the muddy waters of SEC regulation. Despite Coinbase's successful IPO launch in April 2021, the regulatory fight continues, as evidenced by the ongoing Coinbase-SEC lawsuit.
Circle's primary business ventures revolve around its stablecoin, USD Coin (USDC), which has a market capitalization of approximately $33 billion.
The transfer decision is based on a rationale, where the necessity of US regulatory compliance is closely aligned with maintaining investor confidence.
Although the costs associated with compliance may be higher in the United States, the payoff is increased transparency and improved prospects for adoption.
Online financial system
Following in Coinbase's footsteps, Circle's IPO could give USDC a competitive advantage over its top immediate competitor, Tether (USDT).
Following the reversal of monthly USDT transactions in December 2023, increased regulatory compliance could strengthen USDC's position in the stablecoin market.
Jeremy Allaire, CEO and co-founder of Circle, has made his position clear that the future of the “online financial system” will not be “a collection of closed government networks.”
Between moving Circle's legal base to the US, deciding to launch an IPO, and Allaire's tweet stating his view on a decentralized financial system, the strategic angle remains the same.
Circle appears to be aligning with Allaire's vision through a series of strategic reorganizations, including achieving regulatory compliance, securing capital by going public, and enhancing operational capabilities, although these efforts appear to be separate.
