Coinbase, Ripple battle for Circle – 1 firm already has the edge

• Coinbase may be best positioned to acquire Circle, per a Fortune report. 
• Ripple’s earlier $4B-$5B bid was reportedly rejected by Circle. 

Circle, the stablecoin issuer of USDC, may mute its initial public offering (IPO) plans amid a potential buyout by either Coinbase or Ripple. 

According to a Fortune report, Circle was allegedly seeking at least $5 billion, a likely valuation target for its IPO. 

Surprisingly, the firm reportedly rejected a similar $5B bid from Ripple earlier in the month. In fact, some insiders believe Ripple is willing to offer higher bids. 

Coinbase’s leverage

However, Coinbase may have an upper hand in the deal, according to Jeff Roberts, a crypto editor at Fortune Magazine. Roberts said, 

“Banker sources say Coinbase is in talks to buy Circle—a likely outcome IMO given the contract between them. That contract gives COIN sweet terms like veto rights over 3rd party deals.” 

Here, the contract being referenced began in 2018 when Circle and Coinbase launched the Centre Consortium, a joint collaboration to issue the USDC stablecoin. 

The report noted that Coinbase acquired an equity stake in Circle when the arrangement ended in 2023.

But a new distribution agreement for USDC with the exchange entitles Coinbase to 50% of Circle’s USDC reserve revenues, according to an S-1/A filing with the SEC (page 101). 

“After deducting amounts payable to other approved participants in the USDC ecosystem, Coinbase receives 50% of the remaining payment base.” 

In 2024, 2023, and 2022, Coinbase raked in $907 million, $691 million, and $248 million from the above contract. 

In fact, Coinbase was getting the biggest share from Circle’s operations.

Notably, in 2024, Circle’s revenue hit $1.6 billion, but net income was about $155 million, nearly 6x lower than the payment ($907M) to Coinbase. 

The report added that the current Coinbase deal extends beyond revenue and controls Circle’s intellectual property and bars third-party partnerships. 

“This includes a provision that Circle can’t form any new third-party partnership agreements that affect Coinbase’s USDC revenue without the latter’s consent, and another that gives Coinbase partial control over its intellectual property in the event of insolvency.” 

To some, this underscored the exchange’s upper hand in the likely buyout.

That said, some crypto community members bashed Circle founder Jeremy Allaire for failing to turn around the second-largest stablecoin issuer. For closure, Tether, USDT issuer and Circle’s rival, had a $13 billion net profit in 2024.