Plan for Circle to go public has been scrapped. How does this affect the market for stablecoins?
Circle, the company that owns USDC, has decided against going public in a $9 billion deal. A public listing might have positioned USDC as the anti-Tether, advocating an open and audited approach.
Circle, the creator of USDC, had intended to go public with a $9 billion valuation. USDC is a stablecoin with a $43 billion market cap. However, Sam Bankman-Fried and the cryptocurrency markets had different plans.
This deal falling through is further proof of crypto's decline. It was agreed upon in July 2021, with Circle planning to go public through a blank-cheque company led by Bob Diamond, a former executive at Barclays.
“We are disappointed the proposed transaction timed out; however, becoming a public company remains part of Circle’s core strategy to enhance trust and transparency, which has never been more important,” said Jeremy Allaire, Circle's chief executive.
This comes as no shock at all. Price declines caused by increases in interest rates have halted IPOs across the board, not just in crypto. The damage can be seen in Coinbase's stock price, which fell by 84% in 2022.
This year has been challenging for the stablecoin industry. In May, UST experienced a high-profile collapse that brought down a significant portion of the ecosystem. Despite being a “decentralized” stablecoin, DAI is in the odd position of being “very centralized,” and as a result, it is having a hard time.
Its current strategy involves switching from a peg model to a free-floating stablecoin, which sounds contradictory.
The biggest issue with stablecoins is the lingering doubts about Tether's security, even though Tether has de-pegged to 95 cents on several exchanges since the collapse of UST.
In this case, USDC could have significantly benefited from Circle's IPO. Being a public company provides unparalleled safety, disclosures, and openness. Circle's reputation would have benefited considerably from the change, especially compared to its chief competitor, Tether.
It missed a significant opportunity to market itself as the audited, transparent, and secure stablecoin alternative to Tether.
Tether stands to gain the most from this deal's collapse.
Eventually, Circle will go public. I have no doubt it will, but given the current state of the markets, it could be a while before we see any noticeable improvement in the economy or the weather as Europe and the United States continue to sink deeper into winter amid a crippling energy crisis.
They will keep competing until they achieve market dominance. Binance's BUSD stablecoin has emerged as the latest victor after the exchange delisted USDC and several other rivals.
To have USDC's public listing as an ace up its sleeve was always the plan. Now that they have scrapped it, we will have to start the stablecoin war planning process again.
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