Circle is exploring a sale to either Coinbase or Ripple

As the stablecoin issuer presses ahead with plans to go public, it is also in talks with Coinbase and Ripple about a potential acquisition.

Circle is pressing ahead with plans to go public, but the stablecoin issuer is also exploring the possibility of a sale to either Coinbase (NASDAQ:)or Ripple (NYSE:), Fortune reported on May 19, citing people familiar with the matter.

The company filed paperwork in April for a long-awaited initial public offering (IPO) targeting a $5 billion valuation, but informal acquisition talks could alter its path, the report said.

Sources said the discussions are still early-stage and exploratory, with no formal offers on the table yet. However, insiders believe Coinbase is the most logical acquirer, given its deep integration with Circle’s USDC stablecoin ecosystem.

Coinbase and Circle’s relationship

Founded in 2018 through a joint venture called Centre Consortium, Coinbase and Circle were originally co-governors of USDC.

However, that structure was dissolved in 2023, giving Circle full control of the stablecoin’s governance while granting the exchange an equity stake and a favorable revenue-sharing arrangement.

According to Circle’s S-1 filing, Coinbase and the stablecoin issuer split residual revenue 50/50 from reserves backing USDC. But when USDC is held directly on Coinbase’s platform, the exchange receives 100% of that revenue.

This revenue stream has grown in significance, as Coinbase’s recent earnings showed a notable uptick in income derived from USDC-related activity.

The agreement also includes stipulations limiting Circle’s ability to enter into major new USDC-related partnerships without Coinbase’s consent and grants Coinbase partial IP control in the event of Circle’s insolvency.

These provisions suggest a level of interdependence that has led some insiders to view the companies as practically inseparable. A banker familiar with the talks told Fortune that if Coinbase expressed any intention of acquiring the firm, “Circle would sell in a heartbeat.”

Ripple’s initial bid rebuffed

Ripple Labs also approached Circle with a $4 billion to $5 billion offer, but the stablecoin issuer rejected the bid as too low. Ripple’s offer reportedly included a mix of cash and XRP.

According to its first-quarter XRP Markets Report, Ripple held 4.56 billion XRP, valued at approximately $11.8 billion, on its balance sheet and an additional 37.13 billion XRP (around $95.7 billion) in escrow as of March-end.

Although Ripple has been active in acquisitions, including its recent $1.25 billion purchase of prime brokerage Hidden Road, insiders suggest Coinbase is better positioned to acquire Circle given its cash reserves and public market access.

Coinbase, which had $8 billion in cash as of its last quarterly filing, has already completed several acquisitions this year, such as crypto derivatives exchange Deribit for $2.9 billion and the onchain ads platform Spindle.

Coinbase CEO Brian Armstrong has stated that Coinbase is constantly evaluating M&A opportunities but remains selective due to the complexity of integration.

As of now, Circle remains committed to going public, but one private equity executive told Fortune that the situation could change as things are developing “week by week.”