Arthur Hayes has described Circle’s upcoming IPO as the beginning of a dangerous stablecoin frenzy that could lead to massive financial losses. In his recent essay titled Assume the Position, the former BitMEX CEO warned that this event marks the start of what he believes will be a wave of unstable ventures driven by inexperienced investors and persuasive figures lacking substance.
Hayes questions circle’s sustainability and coinbase ties
Hayes criticized Circle’s dependence on Coinbase, highlighting the revenue-sharing agreement where Circle gives up 50% of its net interest income to the exchange. He claimed this relationship places Circle in a subservient position to Coinbase CEO Brian Armstrong. According to Hayes, this arrangement severely limits Circle’s ability to compete with Tether, which retains full control of its profits.
He argued that Circle has never had the necessary infrastructure or strategic positioning to challenge Tether’s dominance. The company’s decision to acquire Poloniex at the peak of the market was also seen as a strategic misstep, further reinforcing Hayes’ view that Circle lacks direction. He noted that Circle operates from Boston, which he sees as far removed from the global hubs of crypto trading activity.
Stablecoins must solve real problems to survive
Hayes emphasized the importance of understanding how fiat money moves in the crypto ecosystem, especially given the regulatory ambiguity that surrounds exchanges. Reflecting on his early experiences in the industry, he described how stablecoins like Tether solved practical problems, such as unreliable banking services and cross-border transfers.
He credited Tether’s success to its integration with Bitfinex and its ability to serve traders in Asia who needed access to U.S. dollars. Tether became the default USD pair during the ICO boom, securing its place in global crypto trading. Hayes argued that Circle, by contrast, arrived late and failed to establish similar roots.
New Stablecoin projects face distribution challenges
Hayes warned that the Circle IPO might spark a flood of new stablecoin projects, many of which will rely heavily on marketing, leverage, and financial gimmicks. Without real distribution networks, he predicted these projects will fail. He stressed that a stablecoin issuer must partner with a major exchange, a leading tech platform, or a traditional bank to survive.
Hayes says that banks will probably not be behind third-party stablecoin startups in terms of compliance restrictions and internal efficiency. In his opinion, banks can use stablecoins; however, they want to develop them on their own. On the same note, he anticipates that social media companies opt to provide internal solutions, where the issuers are totally neglected.