[quanticle]

    But that relegates the centralized exchange into the position of being nothing more than a "fiat on-ramp"

That's actually a pretty profitable business. "If you want to interact in any way with crypto, you either have to go through Coinbase or some shady black market crypto dealer," is actually great news for Coinbase.

[saurik]

I mean, you cut off the rest of that paragraph ;P. Sure: it sounds like maybe a reasonable opportunity for Circle, but Coinbase would effectively be adding no value anymore and would have to attempt to charge (a lot, if they wanted to have any hope of making anywhere near as much money as their current business model) for something that not only are they currently doing for free but which they aren't really doing in the first place (as they are just a thin wrapper around Circle). The only reason Circle isn't bothering with this market is seemingly that they didn't want to deal directly with retail and they don't really have to because Coinbase was willing to integrate it for free... but like, Paxos (which is also regulated) does deal with individual users, so there is no reason Circle can't in a world where Coinbase is otherwise irrelevant. (The reality, though, is that there is still benefit for traders to having centralized exchanges due to their limit order book model, so I wouldn't discount Coinbase just yet, anyway ;P.)

[quanticle]

    The only reason Circle isn't bothering with this market is seemingly that they didn't want to deal directly with retail

That's actually a really good reason! An analogous situation is with e.g. Robinhood and Citadel. In one sense Robinhood is "just" a retail onramp. All their trades go through Citadel. So in theory Citadel could, at any moment, just cut off Robinhood by allowing retail investors to trade directly with them.

But I'm willing to bet that they won't, because dealing with retail investors is a hassle. You have to have customer service. You have to deal with additional regulation. You have to deal with random social media firestorms. It's a mess. I don't blame Citadel for leaving it to Robinhood to deal with these issues and I wouldn't blame Circle for leaving it to Coinbase to deal with the retail issues surrounding crypto.