Circle shifts legal home to US ahead of IPO

Circle's strategic shift away from Ireland could increase compliance costs, but the tradeoff suggests improved investor confidence.

Circle Internet Financial — the company behind the worlds second-largest stablecoin, USD Coin — announced its plans to move its legal base from the Republic of Ireland to the U.S. The shift comes amid tightening cryptocurrency regulations in the U.S.

According to Bloomberg, a spokesperson for Circle confirmed on May 14 that the company had filed court paperwork for the move, but the specific reasons were not disclosed.

The decision aligns with Circles recent step toward going public — it submitted plans for an initial public offering (IPO) confidentially through a brief press release in January.

Legal implications

In contrast to Ireland‘s reduced levels of corporate taxation, the relocation of Circle’s legal base to the U.S. would incur higher tax rates.

However, these benefits are being cut due to global tax reforms led by the Organization for Economic Cooperation and Development (OECD).

After approval in October 2021, the OECD Global Anti-Base Erosion Rules (GloBE) came into force, clamping down on multinational enterprises (MNEs) and issuing a minimum of 15% tax on MNE profits globally.

Furthermore, moving back to the U.S. could subject Circle to a new U.S. regulatory framework and scrutiny from the Securities and Exchange Commission (SEC).

On the heels of its plans for an IPO, Circle would need to strictly adhere to Securities laws as it traverses the muddy waters of SEC regulations. Despite the successful launch of Coinbase's IPO in April 2021, the regulatory combat continues, as demonstrated by the ongoing Coinbase-SEC lawsuit.

Circle's core business ventures revolve around its stablecoin, USD Coin (USDC), which has a market cap of almost $33 billion.

The decision to relocate is grounded in a logical rationale, as the necessity for U.S. regulatory compliance aligns closely with maintaining investor confidence.

Though compliance-related costs may be higher in the U.S., the pay-off is increased transparency and improved likelihood of adoption.

The Internet Financial System

Following in the footsteps of Coinbase, Circle‘s own IPO could grant USDC a competitive edge over it’s number one spot competitor, Tether (USDT).

After flipping USDT monthly transactions in December 2023, an increase in regulatory compliance could solidify USDC's position in the stablecoin market.

Jeremy Allaire, the CEO and Co-founder at Circle, has already made his stance clear that future of the “Internet Financial System” will not be a “bunch of closed government networks.”

Source: Jeremy Allaire

Between relocating Circle's legal base to the U.S., deciding to launch an IPO, and Allaires tweet articulating his perspective of a decentralized financial system, the strategic angle remains the same.

Circle appears to be aligning with Allaire's vision through a series of strategic realignments, including achieving regulatory compliance, securing capital via going public, and enhancing operational capacities, despite these efforts seeming disconnected.