Acquisition of the Axelar team but selling the Token: Circle "wants people, not coins" sparks controversy.

Original: Odaily Odaily Daily Report

Author: Azuma

On the early morning of December 16, stablecoin giant Circle officially announced that it has completed the signing of an agreement to acquire key talent and technology from Interop Labs, the initial development team of the cross-chain protocol Axelar Network, in order to advance Circle's cross-chain infrastructure strategy and support seamless and scalable interoperability for its core products such as Arc and CCTP.

This is another typical case of industry giants merging with high-quality teams in the industry. It seems like a win-win situation, but the key issue lies in the fact that Circle clearly mentioned in the acquisition announcement that this transaction only involves the Interop Labs team and its proprietary intellectual property, while Axelar Network, Axelar Foundation, and AXL tokens will continue to operate independently under community governance. The original project's other contributing team, Common Prefix, will take over the related activities originally belonging to Interop Labs.

In simple terms, Circle has taken over the original development team of the Axelar Network, but the project itself and its token AXL have been abandoned by the brand.

Affected by this sudden news, AXL plummeted in the short term, currently reported at around 0.115 USD as of about 10 AM today, with a 24-hour decline of 15%.

At the same time, the special situation surrounding the acquisition case of “people over coins” and the ensuing issue of “equity vs tokens” has sparked numerous discussions within the community, with proponents and opponents of this acquisition model each holding their ground and arguing endlessly.

Opposing Viewpoint: De facto RUG, Circle is messing around, only the token holders are getting hurt…

The core strength of the opposing faction comes from some VCs, which is not hard to understand—“I invested real money in the project's token rights, got a handful of tokens, and now you're taking away the work? What use is this token to me?”

Simon Dedic, founder of Moonrock Capital, commented: “Another acquisition, another RUG. Circle acquires Axelar but explicitly excludes the foundation and AXL tokens, which is simply a criminal act. Even if it doesn’t violate the law, it goes against morality. If you are a founder looking to issue tokens: treat it like equity or get lost.”

Mike Dudas, co-founder of The Block and founder of 6MV, commented: "For everyone who thinks this is a token vs equity issue, I can tell you clearly that this is entirely Circle causing trouble. There are rumors that Circle's Vice President of Corporate Development once told a co-founder of Axelar, 'I don't care about your investors,' and went ahead to 'buy' them under the investors' noses without paying them, and these IPs and teams are crucial for the launch of Arc.

The founder of Lombard Finance posted the trend of AXL and predicted: “The core team of Axelar has been acquired by Circle, and AXL may now be worth nothing. The token has been issued for more than three years, and the team's equity has already been fully redeemed. However, this result feels very uncomfortable: the team and/or investors sell the tokens with hope, while the tokens can only yield interest, and the owners of that hope seem far away.”

Zach Rynes, a prominent figure in the ChainLink community, stated: "This once again exposes the conflict of interest between tokens and equity that plagues the crypto industry. The development team behind the agreement has been successfully acquired, while the token holders who funded that team have gained nothing. The so-called continued independent operation under community governance is no different than the development team abandoning its users for the sake of profit. If we want to attract user capital.

Nicholas Wenzel, the ecological director of SOAR, stated: “Axelar tokens are heading towards zero, thank you all for your participation. This is yet another acquisition case where token holders gain nothing, while equity holders reap substantial profits.”

Supportive perspective: Normal market behavior, tokens are inherently at the bottom of the capital structure.

If the opposing side focuses more on the unfair treatment of token holders, the supporting side will focus more on the market rules of financing and mergers.

Arca's Chief Investment Officer Jeff Dorman believes that Circle's approach is not problematic, and he elaborated in detail on the capital structure of corporate financing and the natural disadvantages that tokens face.

Companies will finance through different levels of capital structure, and these levels inherently have a clear priority order, with some levels naturally taking precedence over others – secured debt > unsecured senior debt > subordinated debt > preferred stock > common stock > tokens.

History has countless examples showing that the interests of one type of investor are realized at the expense of another type of investor.

• In bankruptcy liquidation, creditors win at the expense of equity investors;
• In a leveraged buyout (LBO), equity holders often profit at the expense of creditors.
• In a take-under, creditors typically have priority over equity holders;
• In strategic acquisitions, both creditors and equity holders can benefit (but not always);
• Tokens are often at the bottom layer of the capital structure…

This does not mean that the tokens have no value, nor does it imply that the tokens necessarily require some form of “protection mechanism”. However, the market needs to recognize a reality: when a company acquires another company that is not worth much, and the tokens issued by that company are virtually worthless, token holders will not magically receive a “windfall dividend” out of thin air. In such cases, the returns on equity are often realized at the expense of losses in tokens.

Avichal Garg, co-founder of Electric Capital, also commented: “This is a normal phenomenon. If all future value is created by the team, then no company would be willing to pay returns to investors.”

Core contradiction: What exactly is a token?

In the controversy surrounding the acquisition turmoil between Axelar and Circle, both parties seem to have their reasons.

The anger of the opposition is real: token holders took on risks at the most difficult times for the project, when liquidity and narrative support were most needed, yet they were completely excluded at the critical juncture of value realization. As a result, the core team and intellectual property completed the monetization of value, while the tokens were left in the vacuum narrative of “community governance”. The market provided the most direct vote with prices, which indeed frustrates all who believe in the value of the tokens.

The judgment of the supporters also has practical rationality: from a strictly capital structure perspective, tokens are neither debt nor equity, and naturally have no priority in the context of mergers and liquidations. Circle has not violated any existing business rules; it simply chose the assets that are most valuable to itself calmly.

The true core of the contradiction does not lie in whether Circle is moral, but rather in a question that has long been deliberately avoided by the industry: what exactly are tokens in the context of legal and economic structures?

When the prospects are bright, tokens are preset as “quasi-equity,” endowed with the imagination of claiming future success; however, in real scenarios such as mergers, bankruptcies, and liquidations, they are quickly reverted to their original form as “non-rights certificates.” This narrative equity and structural foundation is the root of the recurring conflicts.

The Axelar acquisition may not be the last similar controversy, but I hope it can become an opportunity for the industry to further think about the positioning and meaning of tokens—tokens do not inherently possess rights; only rights that are institutionalized and structured will be recognized at critical moments, and the specific forms of realization still require all practitioners to jointly explore and practice.

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Tags: Axelar AXLCIRCLE Interop Labs USDC acquisition stablecoin cross-chain