Author: Fang Dao
Fang Dao Liujin｜
After Circle went public, the market most easily saw a story of a stablecoin issuer: the growth of USDC scale, transparent reserves, clear regulatory pathways, and the continued expansion of the payment network.
However, based on the FY2025 financial data, Circle's true core is not the software platform, nor the payment fees, but reserve income.
Circle's total revenue for the year combined with reserve income amounted to approximately $2.747 billion, of which reserve income was about $2.637 billion, accounting for over 96%. This means that Circle's current profit base remains highly dependent on USDC circulating balance, short-term interest rates, and interest generated from reserve assets.
This determines Circle's valuation logic.
It is first and foremost an interest rate-sensitive financial infrastructure company, not a traditional software company. The larger the USDC scale, the more reserve assets; the higher the short-term interest rates, the thicker the reserve returns. But the problem lies in the fact that Circle cannot keep all this income for itself.
What truly impacts profit retention is the distribution structure.
USDC was initially jointly promoted by Circle and Coinbase. Later, the governance structure was adjusted, and Circle gained sole control over issuance, but Coinbase still retained a highly valuable revenue-sharing arrangement. According to related disclosures, 100% of the reserve income generated from USDC held on the Coinbase platform belongs to Coinbase; Coinbase also gets a share of the reserve income generated from other channels.
This means that Circle handles issuance, compliance, reserve management, and regulatory communication, while Coinbase, through user access points and the location where funds reside, shares the most critical layer of USDC reserve income.
In the stablecoin business, the right to issue is certainly important, but the right to distribute is equally important.
Whoever controls the user entry point, whoever controls where funds reside, will have a stronger ability to capture profits in stablecoin growth.
This also explains why Circle's revenue growth does not necessarily bring a proportionate increase in profit elasticity. The larger the reserve income, the higher the distribution costs. How much of the scale growth ultimately remains depends on how the income is allocated between the issuance layer and the distribution layer.
From this perspective, Coinbase plays a very unique role in the USDC ecosystem.
It does not bear the full responsibility of the issuer, nor does it directly manage USDC reserves, yet through platform traffic and historical agreements, it secures a significant portion of the stablecoin interest income.
Circle is the issuance layer of USDC, responsible for trust and compliance; Coinbase is the distribution layer of USDC, responsible for access and retention. The former determines whether USDC can be accepted by the market, the latter determines how returns are allocated.
This is also the most noteworthy aspect after Circle's listing.
USDC continues to grow, EURC is gaining some traction under the European regulatory framework, and new infrastructure like CCTP, CPN, and USYC are also opening up room for imagination. However, based on currently disclosed data, these new businesses are still insufficient to change the fundamental position dominated by reserve income.
Until non-reserve income truly scales up, Circle's core variables remain three things: USDC balance, short-term interest rates, and the revenue-sharing structure with partners like Coinbase.
Stablecoin competition is shifting from "who issues" to "who distributes."
Circle is responsible for making USDC a trusted digital dollar, while Coinbase, along the circulation path of this digital dollar, takes away a very critical portion of the returns.
Therefore, what should really be watched after Circle's listing is not just whether USDC scale can continue to grow, but on whose profit sheet this growth will ultimately settle.
References
Circle FY2025 Annual Report and Related Disclosures
Coinbase and Circle USDC Revenue-Sharing Arrangement Disclaimer
This article is for information and research exchange purposes only and does not constitute any investment advice. The revenue structures, interest rate environment, and regulatory policies of stablecoin-related companies are subject to uncertainty and require careful judgment.
