Circle will change its legal home to the US before the IPO
Circle Internet Financial – the company behind the world's second largest stablecoin, USD Coin – has announced plans to move its legal base from the Republic of Ireland to the United States. The shift comes amid tightening cryptocurrency regulations in the United States.
According to Bloomberg, a Circle spokesperson confirmed on May 14 that the company filed court documents for the action, but the specific reasons were not disclosed.
The decision is in line with Circle's recent move to go public – it unveiled plans for a confidential initial public offering (IPO) in a brief press conference in January.
Legal implications
In contrast to Ireland's reduced corporate tax rates, moving Circle's legal base to the US will result in higher tax rates.
But these benefits are diminishing due to global tax reform led by the Organization for Economic Co-operation and Development (OECD).
After ratification in October 2021, the OECD's global anti-base erosion rules came into effect, cracking down on multinational enterprises (MNEs) and imposing a minimum tax of 15% on MNE profits worldwide.
Additionally, a return to the United States could subject the club to a new US regulatory framework and scrutiny from the Securities and Exchange Commission (SEC).
According to its plan for the IPO, Circle will have to adhere strictly to securities laws as it navigates the muddy waters of SEC regulations. Despite the successful launch of Coinbase's IPO in April 2021, the battle for control continues, as evidenced by the ongoing Coinbase-SEC lawsuit.
Circle's core business revolves around the US Dollar Coin (USDC), a stablecoin with a market cap of approximately $33 billion.
The decision to relocate is based on rational reasoning, as the need to comply with US regulatory regulations is consistent with maintaining investor confidence.
Although the costs associated with compliance are higher in the US, the payoff is increased transparency and adoption.
Internet financial system
Following in Coinbase's footsteps, Circle's own IPO could give USDC a competitive edge over rival Tether (USDT) for the number one spot.
After reversing USDT monthly transactions in December 2023, increased regulatory compliance could strengthen USDC's position in the stable coin market.
Jeremy Allaire, CEO and co-founder at Circle, has already made it clear that the future of the “Internet financial system” will not be “closed government networks.”
The strategic angle is the same when it moves Circle's legal base to the US, decides to launch an IPO, and expresses its vision for Allier Twitter's decentralized financial system.
While these efforts appear to have stalled, Circle appears to be aligning with Allair's vision through a series of strategic adjustments, including achieving regulatory compliance, access to capital and operational capabilities.
