Circle moves legal home to U.S. ahead of IPO
Circle Internet Financial, the company behind USD Coin, the world’s second largest stablecoin, has announced plans to move its legal base from the Republic of Ireland to the United States. This change comes amid strengthening 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 no specific reasons were disclosed.
The decision is consistent with Circle’s recent moves to go public. Circle confidentially filed its IPO plans in January in a brief press release.
legal implications
In contrast to Ireland’s reduced corporate tax levels, moving Circle’s legal base to the United States would result in higher tax rates.
However, global tax reforms led by the Organization for Economic Co-operation and Development (OECD) are reducing these benefits.
After approval in October 2021, the OECD Global Base Erosion Prevention Rules (GloBE) will come into effect, cracking down on multinational enterprises (MNEs) and imposing a minimum 15% tax on MNE profits globally.
Additionally, upon returning to the United States, Circle may be subject to a new U.S. regulatory framework and scrutiny by the Securities and Exchange Commission (SEC).
Following its IPO plans, Circle must navigate strict compliance with securities laws while wading through the mud of SEC regulations. Despite the successful launch of the Coinbase IPO in April 2021, the regulatory battle continues, as evidenced by the ongoing Coinbase-SEC lawsuit.
Circle’s core business ventures center around USD Coin (USDC), a stablecoin with a market capitalization of approximately $33 billion.
The previous decision was based on logical grounds, as the need to comply with US regulations is closely tied to maintaining investor confidence.
Compliance-related costs may be higher in the U.S., but transparency will improve and adoption will be more likely.
internet financial system
Following in the footsteps of Coinbase, Circle’s own IPO could give USDC a competitive advantage over its number one rival, Tether (USDT).
Increased regulatory compliance after reversing USDT monthly trading in December 2023 could solidify USDC’s position in the stablecoin market.
Circle CEO and co-founder Jeremy Allaire has already made it clear that the future of the “Internet financial system” will not be “a series of closed government networks.”
Between moving Circle’s legal base to the United States, the decision to launch an IPO, and Allaire’s tweets expressing his views on a decentralized financial system, the strategic angle remains the same.
Despite the seeming disconnect in these efforts, Circle appears to be aligned with Allaire’s vision through a series of strategic realignments, including achieving regulatory compliance, raising capital through a public offering, and strengthening operational capabilities.
