Why Did Circle’s Latest Move Cause A Drop in Axelar’s Price?

Stablecoin issuer Circle has acquired Interop Labs, the initial developer of the Axelar network.

This deal excludes the Axelar Network, Foundation, and AXL token, which will continue to operate independently. Common Prefix will take over development responsibilities.

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Circle to Bring Interop Labs Team and Technology In-House

Circle, the company behind the second-largest stablecoin USDC, announced that it has entered into an agreement to acquire Interop Labs’ team and proprietary technology.

The stablecoin issuer plans to integrate this team to accelerate progress on its Arc blockchain and Cross-Chain Transfer Protocol (CCTP). Circle said it expects the acquisition to close in early 2026.

“Our goal is to make blockchain connectivity seamless, and bringing the Interop Labs team into Circle will accelerate the Arc and CCTP roadmaps toward building the hub for multichain internet finance,” Nikhil Chandhok, Chief Product and Technology Officer at Circle, stated.

Meanwhile, both Circle and Interop Labs emphasized that the deal does not include the Axelar network.

“As the Interop Labs team transitions to Circle, the Axelar Network, Foundation and the AXL token will continue to operate independently under community governance and open source intellectual property will remain open source,” Circle added.

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Common Prefix, a long-time contributor to the Axelar Network, will now lead the network’s development. In a recent X (formerly Twitter) post, the team outlined its main priorities for 2026.

The 2026 focus areas include expanding Axelar through new protocols and asset classes, reallocating away from underperforming chains, introducing co-staking of blue-chip assets to strengthen economic security, preparing the network for institutional use through improvements in privacy and compliance, and exploring gasless bridging to enable zero-fee transfers using idle gateway capital.

“Common Prefix is a team of scientists and engineers. Our scientists are post-docs, PhDs, and professors with strong academic backgrounds from renowned universities worldwide. We are an unapologetically multichain team, with deep expertise in Ethereum, XRP Ledger, Sui, Solana, Cosmos, and Bitcoin (having co-invented BitVM). We believe in a multichain world, where different chains can be used for different purposes. Axelar’s interoperability layer is an indispensable component that enables them to communicate,” the team stated.

Market Reaction and Community Concerns

The market reacted quickly to the acquisition news. The AXL token’s price plunged, extending its broader downtrend. At the time of writing, the altcoin traded at $0.11. This represented a decline of nearly 13% over the past day.

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However, it’s worth noting that the decline is not isolated. Over the past day, the broader cryptocurrency market has declined by nearly 4%, with major assets such as Bitcoin and Ethereum in the red.

The move has also caused concerns among some community members. Crypto commentator Nick described the deal as “very concerning” for AXL holders.

“Being an AXL holder/supporter myself, I can’t help but to feel used in a very predatory way here. It feels like they utilized AXL as a monetization tool with retail + VCs being the bread & butter to build the platform. Then at the end of the day sell the platform which is basically everything of value to Circle,” he noted.

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Furthermore, another analyst stressed that the situation highlights what they described as the “token versus equity problem” in the crypto industry.

“You funded the project. You took the risk. You have no claim on the exit. Tokens aren’t shares. They never were. ‘Remains independent and community-governed’ = the people who built it are leaving for greener pastures,” Steady Crypto posted.

The commentator also noted that although Common Prefix has stepped in as the network’s new lead developer, there is no obligation for any team to remain indefinitely.

“Until crypto solves this, every token is a bet that the team sticks around – with zero contractual obligation that they will,” the analyst commented.

While the announcement has clearly shaken confidence among AXL holders, the project’s future now hinges on whether Common Prefix can successfully execute its roadmap and rebuild trust in Axelar’s long-term value proposition.