Coinbase Brings Back the Stablecoin Bootstrap Fund After Six Years To Supercharge DeFi Liquidity

After halting the Stablecoin Bootstrap Fund six years ago, Coinbase has reportedly decided to revamp the program with the aim of improving USDC liquidity on existing and novel DeFi platforms. This will help the exchange to increase the adoption of the USDC in a sector dominated by Tether (USDT) and to provide funding for DeFi lending and trading platforms.

Coinbase Restarts Fund Targeting Leading DeFi Protocols

In a recent announcement, the leading crypto exchange in the U.S., Coinbase, announced that it is restarting the Stablecoin Bootstrap Fund. According to the company, the liquidity fund will deploy to on-chain protocols to make sure they have enough liquidity for their unique use cases. 

Coinbase stated that the initial part of the revived fund is going to be the presence of USDC liquidity on four protocols: Ethereum-only lending protocols Aave and Morpho, as well as Solana-based platform Kamino and Jupiter.

Coinbase Asset Management will execute the deployments, and the vision is to give the users access to consistent interest rates in the established and upcoming DeFi infrastructures. 

Though the exchange did not release the scope of the fund, the previous Stablecoin Bootstrap Fund, initiated in 2019, invested $1 million in the lending protocols such as Compound and dYdX. The first iteration of the attempt contributed to the early development and spread of USDC in the DeFi industry.

Coinbase highlighted that it would collaborate with startup DeFi projects and those looking to scale their growth with stablecoins. This indicates that the company is not going to promote only new projects, ike it did in 2019, but also existing projects looking to expand.

Pushing USDC in the Tether-Dominated Market

In 2018, Coinbase and Circle Internet Group co-founded USDC, and it remains a hub in the coin around which Coinbase remains at the center of. USDC has a market capitalization of $65.6 billion today, and it is second after Tether ($164.6 billion) as the biggest stablecoin.

By pushing USDC into DeFi applications, Coinbase would incentivize more borrowers, traders, and yield farmers to the token and thus fill the gap between it and its competitor. 

Remarkably, Coinbase’s revenue fell, but its stablecoin-related revenue increased, which is mostly due to USDC, growing by 12% to $332 million. This discrepancy emphasizes how USDC is becoming a solid source of revenue to the company, and it is important to invest more in its usage.

Why is Coinbase Restarting the Fund?

The move by Coinbase coincides with the fact that the DeFi industry is gaining momentum and the regulatory outlook in the U.S. is changing to become more crypto-friendly. A major example is the Stablecoin Clarity Act and recommendation from the White House for better regulation of DeFi. 

While the timing is perfect for Coinbase, the company has noted that it is resuming the fund because of how successful the first iteration was. Aggarwal said the projects supported by the first fund have played important roles in driving on-chain liquidity. By restarting the fund, Coinbase aims to play an even bigger role in accelerating the growing interest and adoption of stablecoins and DeFi.