Battle for USDC Control Raises Concerns About Monopolization and Regulatory Intervention

MetaLeX Labs founder Gabriel Shapiro has sharply criticized the potential acquisition of Circle by Ripple, calling such a deal “disastrous” and warning of serious antitrust risks. Against the backdrop of the unfolding multi-billion dollar battle between Ripple and Coinbase for control of the USDC stablecoin issuer, experts warn that a Ripple victory could not only radically change the cryptocurrency market landscape but also trigger unprecedented regulatory pressure. The potential deal is reportedly priced at up to $11 billion, making it one of the largest acquisitions in crypto industry history.

Antitrust Regulation Concerns and Concentration of Power

Gabriel Shapiro, founder of MetaLeX Labs, minced no words when commenting on the possible deal between Ripple and Circle.

“Making Ripple the largest asset issuer on every blockchain would obviously be disastrous and anticompetitive,” he warned, raising serious antitrust alarms.

Shapiro believes that if the acquisition goes through, it won’t sail past regulators.

“If a definitive agreement is signed, we will be at the DoJ’s and FTC’s doorstep, citing Ripple’s history of campaigns against Bitcoin and Ethereum…”

He also pointed to Ripple’s past behavior, calling out how the firm previously used its influence to hurt competitors – like when Chris Larsen teamed up with Greenpeace in 2022 to target Bitcoin mining. According to Shapiro, Circle needs to consider the Revlon doctrine, which requires companies to act in shareholders’ best interests – including weighing antitrust risk.

Shapiro’s concerns are well-founded. Control over USDC, the second-largest stablecoin with a market capitalization of over $30 billion, would give Ripple unprecedented influence in the cryptocurrency market. Add to this Ripple’s own XRP token, and the company could potentially influence a significant portion of liquidity in the ecosystem.

“This would create a situation where one company controls two major liquid assets used in various trading pairs and financial products across the industry,” explains John Alexis, a crypto analyst at Fundstrat. “Such concentration of power raises legitimate concerns regarding market competition.”

Fierce Acquisition Battle: From Rejection to Billion-Dollar Offers

Reports suggest Ripple had initially offered around $4-5 billion to acquire Circle earlier this year – but was turned down. Now, it’s apparently back at the table with deeper pockets, possibly combining cash and XRP reserves for a much higher bid.

“Ripple is setting on holdings at about $94 billion based on estimated around $40 billion in XRP at the current price at $2.37,” said Paul Barron in a now-deleted post.

But legal roadblocks still exist – Ripple can’t easily liquidate those tokens without a judge’s nod, given the company’s ongoing legal issues.

On the other side, Coinbase holds a healthy balance sheet: around $8.5 billion in cash and nearly $2.8 billion in crypto investments. Yet despite its financial strength, it hasn’t made a decisive move – raising questions.

“If Coinbase wanted to buy them, Circle would sell in a heartbeat,” one banker reportedly said.

The deciding factor in this battle may not be so much the size of the offer as the likelihood of regulatory approval. Given Ripple’s past legal troubles with the SEC, the deal could face additional hurdles.

Historical Context: USDC and Circle’s Strategic Importance

To understand the significance of this potential deal, it’s necessary to recognize the role of Circle and USDC in the crypto ecosystem. Launched in 2018, USDC quickly became one of the most trusted dollar-pegged digital assets, with a reputation for strict regulatory compliance and transparent reserve reporting.

Circle isn’t just issuing a stablecoin – the company has built an entire infrastructure for institutional payments and financial services. In 2023, Circle launched the Cross-Chain Transfer Protocol, allowing USDC to move easily between different blockchains, further cementing the stablecoin’s position as a crucial connecting element in the crypto economy.

“USDC is not just another stablecoin, but fundamental infrastructure for many DeFi protocols, cross-chain bridges, and payment solutions,” explains Sarah Brennan, a researcher at The Block. “Control over this asset provides significant influence over the direction of the entire industry.”

For Ripple, acquiring Circle represents a strategic opportunity to diversify its business beyond existing XRP-based payment solutions and strengthen its position in the cross-border payments market. However, it’s precisely this strategic significance that raises concerns about excessive concentration of power in the hands of one company.

Potential Market Consequences and New Entrants

Ripple’s acquisition of Circle could instantly shift stablecoin dynamics. But if Shapiro’s warnings play out, this could turn into a defining moment for the future of cryptocurrencies.

And let’s not rule out a “dark horse” in this race. Firms like Japan’s SBI Holdings, one of the biggest XRP holders, could jump in with support. There’s also speculation that traditional financial institutions might express interest in Circle, given the growing integration of cryptocurrencies into mainstream finance.

“We shouldn’t exclude the possibility that a traditional financial giant might see strategic opportunities in Circle,” notes Michael Ippolito, financial analyst. “Especially considering how major banks are starting to experiment with digital assets and stablecoins.”

Interestingly, some market participants view Coinbase’s potential acquisition of Circle as a more favorable outcome, given Coinbase’s reputation for collaboration with regulators and a more neutral market position.

“Coinbase has experience working with regulators and is already an important Circle partner as a co-founder of Centre, the consortium managing USDC standards,” explains Ryan Selkis, founder of Messari. “This could be a smoother transition with fewer regulatory risks.”

Regulatory Response and Broader Industry Implications

Regardless of who ultimately acquires Circle, this deal will almost certainly attract close regulatory scrutiny. In an era when the cryptocurrency industry is already under the microscope, a transaction of this magnitude could trigger an unprecedented level of examination.

“Given recent actions by the SEC and CFTC against other cryptocurrency market participants, any major merger or acquisition will likely invoke thorough scrutiny,” warns Carol Van Cleef, regulatory partner at Davis Polk law firm. “Especially considering that this concerns stablecoins, which are already at the center of regulatory attention.”

It’s possible that even the process of reviewing the deal could accelerate regulatory clarity regarding stablecoins and the cryptocurrency market as a whole. The need to assess the impact of such an acquisition might force regulators to more clearly define their position on many issues that remain in a gray area.

Finally, the outcome of this battle for Circle could set a precedent for future mergers and acquisitions in the industry. As the cryptocurrency sector matures, consolidation becomes increasingly likely, and how this high-profile deal is handled could determine the landscape for future transactions.

“Regardless of the outcome, this situation is a sign of industry maturation,” concludes Simon Taylor, co-founder of 11:FS and fintech expert. “When we see potential M&A deals of this scale, it shows that the crypto industry is entering a new phase of development where strategic positions and market power play an increasingly important role.”

For now, neither Ripple, Coinbase, nor Circle have officially confirmed these talks, leaving the market in a state of tense anticipation for developments that could determine the future trajectory of the entire cryptocurrency industry.