Author: Yue Xiaoyu

Introduction:

The Web3 industry is developing too quickly, with new things emerging every day. Therefore, many daily thoughts are worth recording.

These thoughts will be updated in real-time on Twitter and periodically summarized and published on WeChat.

Many people actually do not understand the significance of the collaboration between OKX and Circle, which reveals a lot of information behind it.

First, why did OKX and Circle reach a partnership?

To understand the reasons for this collaboration, we must first understand the current situations of both parties.

1. Let's first look at OKX's current situation:

Recently, there have been rumors that OKX will go public in the United States, and we can see that its compliance actions have been accelerating.

Previously, it halted DEX services for compliance rectification and is now clearing out non-compliant users and funds from online lending.

These actions indicate that OKX's path to compliance is becoming increasingly clear, with the ultimate goal of listing on the US stock market.

At this time, OKX needs a heavyweight local partner in the United States to provide stronger support for its listing journey.

On the other hand, there are also considerations regarding stablecoin payment services. Previously, OKX specifically developed OKX Pay, and expanding upstream to stablecoin issuers is very valuable.

OKX's collaboration with Circle is also aimed at occupying an important ecological position in stablecoin payments, gaining a larger profit margin throughout the payment process.

2. Now, let's look at Circle's current situation:

Circle has already gone public in the United States and seems to be in a strong position, but it has a significant potential risk: being too closely tied to Coinbase.

This starts with the development history of USDC:

USDC was initially issued by Center, a joint venture between Circle and Coinbase, with both companies sharing equity and control equally.

In the second half of 2023, Center was shut down, and all control was transferred to Circle, which is now fully responsible for USDC operations.

However, according to the agreement disclosed in Circle's prospectus, Coinbase still holds 50% of USDC's profits and receives additional dividends based on the proportion of USDC held on the platform.

Last year, Circle made approximately $1.6 billion in profit, with about $1 billion paid to Coinbase.

These two companies also have a very important agreement: if Circle cannot distribute dividends to Coinbase or encounters regulatory issues, Coinbase has the right to take over USDC and become the issuer.

Therefore, although USDC is now fully operated by Circle, Coinbase still plays an important role.

This explains why Circle and Coinbase are currently so closely tied.

3. Returning to the stablecoin business itself

The key to the stablecoin business is liquidity.

Many stablecoin issuers are exchanges because exchanges are natural channels.

Without liquidity, stablecoins are almost impossible to succeed.

Initially, Circle and Coinbase collaborated to solve the biggest pain point: immediately gaining liquidity, users, and trading pairs after issuance.

As the largest exchange in the United States, Coinbase brought significant traffic and brand credibility to USDC.

Now, Circle needs to address the potential issue of being too closely tied to Coinbase.

Today, Circle has found a second exchange outside the United States that can provide users and liquidity, which is OKX.

Some may ask: Why not Binance?

The main reason is that Binance does not need USDC as much.

Before Circle went public, Binance was unaware that Circle had paid $1 billion in promotional fees; Binance only received $60 million but gave Coinbase $900 million.

So why would Binance help Circle promote USDC? It can be seen that Binance is now aligning with the Trump family's USD1.

In contrast, the second-largest exchange outside of Binance, OKX, needs Circle more.

4. In summary

In short, the collaboration between OKX and Circle can be seen as mutually beneficial:

OKX becomes Circle's first non-U.S. compliant exchange partner, bringing strong compliance power and local support for its listing journey, while also enhancing its stablecoin payment business.

For Circle, OKX is a great channel outside the United States, and collaborating with OKX can alleviate the restrictions imposed by Coinbase while expanding new users and liquidity.

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