Original Article Title: "Circle: A Comprehensive Analysis of the Leading Compliance Stablecoin"

Original Article Author: Lawrence Lee, MintVentures

1. Research Summary

Key points regarding Circle's valuation and investment can be summarized as follows:

Scarce Asset in the Stablecoin Industry: Circle operates in a stablecoin industry that is currently experiencing rapid growth. The gradual clarification of the U.S. regulatory framework has further strengthened the industry's long-term development certainty, attracting many industry giants to accelerate their expansion. Despite intensified competition posing some pressure on Circle, it also confirms the market's recognition of the long-term value of the stablecoin track. Circle currently holds the second largest market share in the stablecoin market and is the only listed entity available for investment, making this scarcity a key consideration in investors' decision-making process.

Valuation Implies High Growth Expectations: From various valuation indicators, Circle's current valuation level is relatively high, reflecting the market's already priced-in optimistic outlook on its growth prospects, with some valuation logic even referencing its future position as a leading player in the financial infrastructure. The future stock price trend will heavily depend on whether the company's actual performance matches or exceeds market expectations. If quarterly financial performance or key operational metrics fail to meet optimistic expectations, it may trigger a valuation pullback.

Medium-Term Financial Performance Under Pressure: Circle's financial performance largely depends on three key drivers: USDC supply is expected to continue growing with industry expansion and company operational optimization, but with short-term U.S. bond yields entering a downward cycle, coupled with high distribution and transaction costs still at elevated levels, its revenue and profit margins are expected to face pressure in the near future.

Significant Unlocking of Shares in November-December: Shares from early investors will be unlocked in a concentrated manner in November-December, with the majority of investment holding periods nearing or exceeding a decade, indicating strong exit demands. This event may exert significant downward pressure on Circle's stock price.

Future Catalysts: In the short to medium term, several potential catalysts may impact Circle's valuation:

- Obtain a Banking License – If Circle is granted an OCC trust charter, it will become the first stablecoin bank in the U.S., greatly enhancing its status and trustworthiness, potentially triggering a revaluation of its worth.

- Business Diversification Progress – If Circle announces new revenue streams (e.g., launching a payment processing fee scheme) beyond market expectations, it will improve the rate dependency impression, boost valuation.

- Mergers and Partnerships – Any deepening collaboration with large banks/tech companies or potential mergers (e.g., being acquired by a larger financial institution) will impact the market's assessment of its ultimate value.

Conversely, negative catalysts such as a sudden Fed rate cut, competitors launching stablecoins, security incidents, etc., will suppress valuation.

Investment Recommendation:

Based on the above, our stance on Circle's stock tends towards "neutral." The reason is: although Circle has a bright long-term outlook, the current price already fully reflects or even anticipates optimistic expectations, with a low valuation safety margin. Considering the remaining macro and industry uncertainties, there is a higher short-term volatility risk.

PS: This article represents the author's interim thinking as of the publication date, and changes may occur in the future. The viewpoints are highly subjective and may contain factual, data, or reasoning errors. All opinions in this article are not investment advice. Criticism and further discussion from peers and readers are welcome.

2. Business and Product Line

Circle Internet Financial was founded in 2013 by Jeremy Allaire and Sean Neville, with a mission to "foster global economic prosperity through frictionless value exchange." The company initially focused on the cryptocurrency payments sector but faced challenges during its development. Throughout this process, Circle actively explored other business directions, including establishing the cryptocurrency OTC platform Circle Trade, acquiring the cryptocurrency exchange Poloniex, and acquiring the crowdfunding platform SeedInvest.

In 2018, Circle, along with Coinbase, co-founded the Centre Consortium and launched the US Dollar Stablecoin (USDC), positioned as a compliant, transparent digital dollar stablecoin. USDC quickly became the world's second-largest stablecoin, second only to Tether (USDT). Subsequently, Circle gradually divested non-core assets such as Poloniex, SeedInvest, focusing its strategic emphasis on the stablecoin and its related business.

Currently, Circle's core business revolves around stablecoins and includes payment settlement, corporate treasury services, developer platforms, and wallet services, among other derivative segments. This includes:

2.1 Stablecoin Issuance and Reserve Management

USD Coin (USDC) Issuance

USDC is Circle's flagship product, minted and redeemed on-demand by its regulated subsidiary. As of September 15, 2015, the circulating supply of USDC is 72.7 billion. Circle commits to holding 1 U.S. dollar equivalent reserve asset in a bank custody account or a compliant fund for every 1 USDC issued, ensuring a 1:1 peg to the U.S. dollar.

The company employs daily monitoring and a T+2 settlement mechanism: after a user submits a USD deposit request through a Circle account, Circle mints the corresponding USDC on the blockchain and sends it to the user's wallet upon confirming the fiat arrival; the redemption process is the reverse, where Circle burns USDC and returns the equivalent fiat to the user. This "mint and burn" mechanism guarantees a stable USDC supply.

Composition of Reserve Assets

Circle adheres to a strict reserve management policy, investing reserve assets only in cash and U.S. government bonds with maturities not exceeding 3 months to ensure "safety, high liquidity, and transparency." As of the latest disclosure on July 31, 2025, approximately 85% of the USDC reserves are in the U.S. dollar market fund (primarily holding U.S. Treasuries), and 15% are in deposits of Global Systemically Important Banks (GSIBs). This means that the majority of reserve assets are highly liquid and can meet concentrated redemption demands.

Circle partnered with BlackRock to establish the "Circle Reserve Fund," placing the treasury bond reserve assets in this SEC-registered fund managed by BlackRock. The fund's holdings and net asset value are regularly disclosed, with Circle as the sponsor and beneficiary, not directly involved in investment decisions, thereby enhancing the professionalism and transparency of reserve operations. The remaining cash reserves are held in various GSIBs (such as BNY Mellon, JPMorgan) to support daily liquidity for redemptions and interfacing with payment systems.

Reserve Transparency and Auditing

Circle considers transparency as a cornerstone of the USDC trust system. Since its issuance in 2018, the company has monthly engaged an independent auditing firm to provide reserve attestation reports, disclosing the USDC circulation and corresponding reserve asset details. Currently, auditing services are provided by Deloitte. The audit reports consistently demonstrate that the total value of USDC reserve assets slightly exceeds the total value of USDC in circulation, reflecting a 100% reserve ratio and risk-buffering mechanism. Circle strictly segregates its own funds from USDC reserves, eliminating misappropriation risks.

Compared to Tether, which has been fined by regulators for its opaque reserves, Circle's self-regulatory and transparent strategy has garnered trust from regulators and institutional clients. In 2023, Circle took the lead in responding to SEC accounting guidance, providing detailed disclosure of the USDC reserve holdings in its 10-K report. As the company progresses towards going public, Circle will quarterly submit financial and operational data to the SEC, further enhancing operational transparency and market confidence.

EURC and Expansion to Other Currencies

In addition to the US dollar stablecoin, Circle launched the Euro stablecoin Euro Coin (EURC) in 2022, pegged 1:1 to the Euro. EURC follows the management model of USDC, with reserve assets in Euro cash and short-term European government bonds. Although the current market capitalization of EURC is small (approximately 200 million Euros), with the enforcement of the EU's Markets in Crypto-Assets Regulation (MiCA) and the Eurozone's changing attitude towards digital finance, it has significant growth potential.

Circle has indicated that it will explore issuing other G10 currency stablecoins (such as GBP, JPY, etc.) based on market demand and regulatory environment. The company recently received provisional approval in the Abu Dhabi Global Market, UAE, to provide payment services, including stablecoins, hinting at its potential entry into the Middle Eastern market and even the launch of stablecoin products anchored to local currencies (such as the Dirham). Through multi-currency expansion, Circle aims to build a stablecoin matrix covering major fiat currencies, consolidating its leading position in the global stablecoin field.

2.2 Payment Settlement and Corporate Treasury Services

Circle Corporate Account

Circle provides comprehensive Circle Account services for corporate and financial institution clients. Through a single account, clients can achieve two-way exchange, send and receive, and balance management of fiat currencies and digital currencies such as USDC. Taking cross-border e-commerce as an example: a company can deposit US dollars into a Circle account and instantly convert them to USDC, directly pay overseas suppliers in USDC; suppliers can also convert USDC into local fiat currency at any time. The entire process only takes a few minutes, significantly improving efficiency compared to traditional SWIFT transfers.

The Circle account supports multiple fiat deposit and withdrawal channels, including ACH, SWIFT, wire transfers, and SEPA, leveraging integration with global banks and payment networks to achieve extensive coverage. In terms of blockchain payments, the account supports multi-chain USDC receiving addresses, allowing clients to choose networks (such as Ethereum mainnet or Solana chain) based on cost and speed requirements. Additionally, the Circle account offers multi-user permission management, transaction record exports, and other treasury functions to meet corporate financial operational needs.

Payments API

Circle's Payments API supports developers in integrating fiat-to-stablecoin payment functionality into their platform. Through API calls, merchants can receive customer payments and instantly convert them to USDC. For example, if a user pays $100 with a credit card, the merchant can use the Circle API to instantly convert that amount to USDC and deposit it into their Circle account, avoiding the high fees and exchange rate risks of cross-border settlement while maintaining a seamless payment experience for the user.

Merchants can also utilize the "Payouts" feature to convert USDC to local fiat currency through the API and distribute it to users via the banking network. Currently, Circle's payment network covers over 100 countries, effectively bridging the gap between unbanked users and the digital wallet ecosystem.

Treasury and Exchange Services

Circle provides key treasury infrastructure for digital asset exchanges and brokers. Traditional banking channels often suffer from slow speeds and complex compliance issues. By accessing Circle's accounts, exchanges can quickly convert user USD deposits to USDC for near real-time on-chain deposits. Withdrawals are facilitated through USDC for cross-chain transfers and local exchange, significantly improving efficiency and user experience.

Currently, many trading platforms, including Coinbase, widely use USDC as a substitute for the US dollar. While USDC's trading volume on centralized platforms is still lower than USDT, it holds about a third of the market share on top exchanges like Binance. Through large OTC client minting services, Circle supports exchanges and institutions in efficiently completing bulk USDC purchases and redemptions, especially aiding in stabilizing liquidity during market fluctuations.

In addition, Circle's API also supports large-scale OTC trading and clearing, such as inter-institution settlement of loans and securities using USDC to avoid delays in bank cross-border settlements. Overall, Circle's payment and treasury services directly serve end-user scenarios like e-commerce and remittances while also providing support to exchanges and institutions as underlying financial infrastructure. This enterprise-focused model expands the USDC's application ecosystem, enhancing business stickiness and customer relationships.

2.3 Developer Platform and Wallet Services

Wallet API and Development Tools

Circle has launched a series of developer tools to lower the barrier to blockchain integration. The Wallets API enables businesses to quickly create and manage digital asset wallets without handling private key management and on-chain interactions themselves. Developers can use API calls to generate USDC wallet addresses for users, check balances, and initiate transfers, with secure key custody and signing handled uniformly by Circle's backend.

Such services are particularly suitable for traditional enterprises looking to introduce digital asset functionality. For example, a gaming company can use the Wallet API to create USDC wallets for players, distribute in-game rewards, and support withdrawal and conversion without needing deep blockchain technical expertise. Circle also provides blockchain node services and smart contract interfaces, supporting interaction with multiple chains such as Ethereum and Solana to enhance development efficiency.

In 2022, Circle further strengthened institutional-grade security features such as multi-signature wallets and permission management through the acquisition of CYBAVO, aiding in the secure custody of large digital asset holdings. These initiatives are aimed at positioning Circle as the "AWS of the blockchain space," driving traditional application adoption in the stablecoin ecosystem through foundational digital currency services. While the current API service revenue share is relatively small, its strategic significance lies in expanding the scale and circulation of USDC applications, indirectly fueling core business growth.

Cross-Chain Interoperability and CCTP

USDC is currently deployed on the Ethereum mainnet, various Layer 2 networks (such as Arbitrum and Optimism), Solana, Avalanche, Tron, and over 10 other blockchains. To address the issue of multi-chain liquidity fragmentation, Circle has developed the Cross-Chain Transfer Protocol (CCTP), allowing users to transfer USDC between different chains without relying on centralized exchanges or third-party bridges.

CCTP achieves cross-chain transfers through a "burn on the original chain, mint on the target chain" process and issues certificates by Circle to ensure process security and trust. The protocol gained widespread attention in 2023 as a key innovation to address cross-chain bridge security risks and enable efficient value transfers. CCTP not only strengthens Circle's management of USDC cross-chain liquidity but also enhances the consistency of USDC in a multi-chain environment (maintaining the total supply while enabling cross-chain migration), further solidifying Circle's central role in the stablecoin ecosystem.

2.4 Future Product Line Expansion

Looking ahead, Circle is actively expanding its new products and services to broaden revenue streams and solidify its ecosystem advantage:

- Stablecoin Blockchain ARC: In August 2025, Circle announced the launch of ARC, an open Layer 1 blockchain designed specifically for stablecoins. The chain features USDC as the native Gas token, an embedded forex engine, supports 24/7 peer-to-peer on-chain settlement, and is EVM compatible. The ARC testnet is expected to launch this fall, with the mainnet scheduled for 2026. ARC will become the core vehicle for Circle's future business, with multiple services built on this chain.

- Cross-Border Foreign Exchange: After the launch of ARC, Circle can leverage USDC/EURC to develop cross-border foreign exchange services, enabling fast exchange between USD and EUR, providing better exchange rates and efficiency compared to traditional forex channels, thus tapping into the multi-trillion-dollar forex market. Digital Identity and Compliance: To meet regulatory requirements, Circle may introduce on-chain identity verification services, allowing institutions to verify the KYC status of transaction counterparty addresses, building a "permissioned stablecoin" ecosystem to attract financial institutions sensitive to anonymous transactions to use the USDC network.

- Lending and Yield Products: Despite current legal restrictions on stablecoins paying interest to the public, Circle can still conduct USDC lending services on the institutional side, such as accepting collateral and lending USDC, earning interest income, similar to securities lending. If regulations permit, Circle may relaunch institution-facing yield products (such as "Circle Yield") to expand profit channels under strict risk control.

CBDC Partnerships: As multiple central banks advance their central bank digital currency (CBDC) plans, Circle can play a role as a technology provider or distributor. For example, Circle may participate in the planned digital pound sterling pilot in the UK, acting as a private sector distributor providing exchange and custody services. The company is also actively exploring partnerships with other CBDC teams to maintain its core position in the digital currency field.

In conclusion, Circle is gradually evolving from a single stablecoin issuer to a comprehensive digital financial ecosystem enterprise covering "stablecoin + payments + developers + banking services." Through horizontal and vertical business expansions, Circle has not only opened up new growth opportunities but has also become more deeply embedded in the digital economic infrastructure. With the unleashing of synergies across its business lines, Circle is poised to build a USDC-centric digital financial network, creating long-term value for its shareholders.

3. Management and Governance

3.1 Core Management Team

Co-founder and Chief Executive Officer (CEO) Jeremy Allaire is a serial entrepreneur in the internet industry, having founded the video streaming platform Brightcove and successfully led it to an IPO. He has a profound understanding of the open internet and financial technology field, widely recognized as a figurehead in the stablecoin industry, actively participating in U.S. congressional hearings and policy discussions, advocating for industry-appropriate regulation.

Another co-founder, Sean Neville, served as President in the early days of the company, laying the foundation for product and technology, and transitioned to a board advisor role in 2019 while still holding shares in the company.

The company's executive team also includes Chief Financial Officer (CFO) Jeremy Fox-Geen, who joined Circle in 2021 after previously serving as Managing Director at Barclays Investment Bank in the UK, bringing extensive traditional financial and capital markets experience and leading the company's SPAC merger and IPO preparation.

Chief Operating Officer (COO) Elisabeth Carpenter and Chief Legal Officer (CLO) Flavia Naves both come from traditional financial or tech giants, bringing valuable operational and compliance management experience to the company. The legal team has played a crucial role in navigating a complex regulatory environment and obtaining licenses in various regions.

Overall, Circle's management team combines technological innovation thinking with a rigorous compliance mindset, laying a solid foundation for the company's stable operation amidst rapid growth.

3.2 Board of Directors and Governance

In 2018, Circle and Coinbase jointly formed the Centre Consortium, dedicated to USDC-related matters, with a 50%:50% ownership split between the two. In 2023, Circle restructured its partnership with Coinbase to directly manage USDC affairs, with Coinbase relinquishing its original equity stake and holding a small ownership in Circle instead, while still retaining a 50% revenue share of USDC (refer to Section 5.2 "Distribution and Transaction Costs" below for detailed explanation of their collaboration). As a result, Coinbase continues to play a significant role in the development of USDC and remains a member of Circle's board of directors.

In addition to Coinbase, Circle's board of directors also includes industry veterans and strategic investor representatives. Jeremy Allaire serves as the Chairman of the Board, with board members representing investors from funds like Goldman Sachs, Excel, Breyer, ensuring the company's strategy aligns with investor interests. Moreover, Circle has onboarded several independent directors, such as Heath Tarbert, former Chairman of the Federal Deposit Insurance Corporation (FDIC), and other individuals with extensive regulatory backgrounds, providing robust support for the company's public listing process and compliance operations.

3.3 Governance Structure and Shareholder Rights

Circle adopts an AB dual-class share structure: Class A common shares are held by public investors, while Class B shares are held by the founding team and early investors, granting them enhanced voting rights. This mechanism ensures that founder Jeremy Allaire can maintain control over the strategic direction even after the company goes public, avoiding short-term market pressures that may interfere with long-term development plans.

Prior to the IPO, the company had completed multiple rounds of internal governance optimization, such as establishing an audit committee, compliance and risk committee, led by independent directors to oversee financial reporting and risk management. According to the prospectus, Circle has established a robust internal control system in areas such as Anti-Money Laundering (AML), sanctions compliance, equipped with a dedicated compliance team, and undergoes annual external audit assessments.

Circle has also established clear reserve management policies and contingency plans. For example, during the Silicon Valley Bank incident in March 2023, Circle temporarily had $3.3 billion in cash reserves that could not be withdrawn, leading to a brief USDC off-peg situation. The company's management promptly issued a transparent statement, committing to cover any potential shortfall with its own funds. Eventually, with the intervention of the Federal Reserve, the reserve assets were preserved, and USDC peg was restored. This event highlighted the management's ability in crisis response and risk communication, taking timely and effective measures to prevent user panic.

3.4 Compliance and Regulatory Relations

Since its inception, Circle has always placed a high emphasis on operating with compliance and has been hailed as a "regulatory embracer." In 2015, Circle became the first holder of the BitLicense in New York State. This license is considered one of the strictest state-level regulatory licenses in the digital currency industry, demonstrating the company's high level of compliance.

Subsequently, Circle has obtained money transmitter licenses in 46 U.S. states, as well as qualifications such as the Financial Conduct Authority (FCA) Electronic Money Institution license in the UK and an exemption license in Singapore. The company invests heavily each year to meet Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements, and its internal compliance team conducts real-time monitoring of large and unusual transactions, promptly reporting any suspicious activities.

This compliance-oriented image has built a strong foundation of trust for Circle when communicating with regulatory agencies. CEO Jeremy Allaire has testified multiple times in the U.S. Congress, supporting the establishment of federal stablecoin regulations and expressing willingness to act as a "guinea pig" for stricter regulation in exchange for the long-term health of the industry.

In June 2025, after the U.S. Senate passed the stablecoin bill, Circle promptly initiated the application process for a Federal Trust Bank Charter, striving to become one of the first compliant stablecoin issuers. It can be said that Circle's relationship with regulatory agencies is primarily cooperative, and the management team is acutely aware that only by proactively embracing regulation can they gain mainstream market acceptance. This governance philosophy will help Circle maintain a leading position in future compliance competition and continue to shape a positive government and public image.

4. Industry Analysis

4.1 Global Stablecoin Market Overview

A stablecoin is a type of cryptocurrency that is pegged to the value of a fiat currency or other asset, designed to combine the price stability of fiat currency with the efficiency of blockchain technology. It has become a key bridge connecting the crypto ecosystem with the traditional financial system. Since 2020, the stablecoin market has experienced explosive growth, with the total market capitalization rapidly rising from less than $100 billion to nearly $2 trillion in 2022. Despite experiencing a short-term decline during the cryptocurrency market correction, the total stablecoin market capitalization has now exceeded $270 billion as the cryptocurrency market heats up. As of July 2025, the stablecoin supply accounts for over 1.2% of the U.S. M2 money supply (with total U.S. M2 supply at $22.12 trillion), making the scale quite significant.

The current stablecoin market is dominated by USD-denominated products, accounting for over 95% of the market, while other stablecoins pegged to currencies such as the Euro and the British Pound are still in the early stages of development. Within USD stablecoins, USDT and USDC collectively hold about 85% of the market share, forming a duopoly.

Stablecoin Circulation Source: theblock

The demand for stablecoins mainly comes from the following areas:

1. Cryptocurrency Trading Demand

Stablecoins continue to serve as the primary unit of account and hedging tool in the digital asset market, helping traders quickly switch between different currencies and lock in value during market fluctuations. The medium of exchange in the crypto market has shifted entirely from BTC to stablecoins in the 2019-2021 cycle, with over 95% of spot trading volume now coming from trading pairs of cryptocurrencies and stablecoins. In recent years, perpetual contracts based on stablecoins have also rapidly developed, with trading volume several times that of spot trading, and their trading depth is on par with spot trading. The promotion of perpetual contracts has further increased the penetration of stablecoins among traders.

The settlement demand from the crypto market remains the primary source of stablecoin demand.

2. Cross-Border Payments and Financial Inclusion

With advantages such as fast cross-border transfers, low fees, and 24/7 availability, stablecoins have shown significant potential in international remittances and trade settlements. Traditional remittances rely on multiple intermediaries, are time-consuming, and incur high costs, while using stablecoins like USDC can achieve near-real-time peer-to-peer settlements. Several payment service providers and remittance companies are actively piloting the integration of stablecoin networks, and traditional payment giants such as Visa and Mastercard are closely monitoring the technological integration in this area.

3. DeFi and Digital Finance Applications

In the ecosystem of decentralized finance (DeFi), stablecoins serve as the foundational collateral and unit of account for lending, liquidity provision, and derivatives protocols. Users can deposit stablecoins into DeFi platforms to earn interest or participate in liquidity mining, giving them a quasi-savings account function. During the DeFi boom of 2021, there was a significant increase in on-chain lending demand for USDC, leading Circle to launch "Circle Yield" to provide institutional fixed-income services. However, with the industry turbulence in 2022 (such as the Terra algorithmic stablecoin collapse), such yield-generating activities have shifted towards a more cautious approach.

4. Macro Environmental Impact

Geopolitical factors and global financial trends have also influenced stablecoin development. Despite the rising calls for "de-dollarization," stablecoins have objectively expanded the use of the US dollar: due to their high level of convenience, many overseas markets prefer to hold USDC or USDT rather than their local currencies, thereby strengthening the actual influence of the US dollar. According to ARK Invest analysis, the total amount of US Treasury bonds held by stablecoins exceeds that of countries such as Germany and South Korea. Stablecoins are becoming important new buyers of US Treasury bonds and a new vehicle for the internationalization of the US dollar, to a certain extent consolidating the US dollar's status as a reserve currency. Especially in emerging markets, high inflation and capital controls have prompted residents to view stablecoins as substitutes for the dollar, used for everyday payments and value storage. For example, in Argentina, Nigeria, and other places, USDT and USDC have been widely adopted, forming a "parallel currency network" to compensate for deficiencies in the local financial system.

Monthly Stablecoin Trading Volume Source: Grayscale

Additionally, noteworthy is the Agentic Payments Protocol 2 (AP2) jointly launched by Google and Coinbase on September 17th, which aims to securely initiate and process AI agent-led payments across platforms. AP2 introduces stablecoins as the primary means of payment, and is also expected to accelerate the circulation of stablecoins in the short term. The feature of stablecoins being blockchain-based rather than human biometric information naturally makes them more suitable for economic activities between AI agents than other payment systems, and in the future, economic activities between AI agents may also promote further expansion of the stablecoin market.

4.2 Competitive Landscape

The previous stablecoin market presented a competitive situation of "two giants amidst many strong players": Tether (USDT) and Circle (USDC) held the top two positions. Based on current issuance scales, USDT has a market share of approximately 58%, while USDC holds around 25%. USDT, issued by the offshore company Tether, has maintained its dominant position through first-mover advantage and deep integration with many exchanges, but its operational transparency and compliance have long been questioned, with reserve disclosure and audit insufficiency becoming a focal point of concern for European and American regulatory agencies.

In contrast, the USDC issued by Circle is known for its compliance and transparency, holding licenses for money transmission in multiple U.S. states and permits such as the New York BitLicense. Circle actively conducts monthly audits, with the reserve assets consisting of 100% cash and short-term U.S. Treasury bonds, with the vast majority held in U.S.-regulated funds. This prudent strategy has significantly enhanced institutional trust in USDC. With global regulatory tightening, it is expected that USDC will further expand its share in markets with high compliance requirements (such as the U.S., EU), while USDT may face constraints in certain jurisdictions (such as those limited by the EU MiCA regulations).

Other key competitors include:

Payment Giants: PayPal launched the USD stablecoin PYUSD in 2023, leveraging its extensive user and merchant network to promote stablecoin payments. Currently, the circulation of PYUSD is 1.17 billion, still much smaller than USDC, but PayPal's brand and distribution capabilities make its potential undeniable. Recently, Stripe also announced the launch of the stablecoin L1 Tempo, while Visa and Mastercard are positioning themselves in the stablecoin payment sector through partnerships and investments.

Financial Institutions: JPMorgan issued JPM Coin for interbank settlement; Société Générale introduced the Euro stablecoin. With stablecoin legislation successfully passing, it is expected that more banks will participate in the competition with their credit endorsements, but their applications may be focused on enterprise payments and on-chain settlement in B2B scenarios, limiting direct competition with USDC in the public market.

Decentralized Stablecoins: Such as Ethena's USDE, MakerDAO's DAI, and USDS, among others. In terms of issuance volume, USDE and the combination of USDS and DAI currently rank as the third and fourth largest stablecoins by issuance volume (with circulation amounts of 13 billion and 9.5 billion, respectively). USDE introduced cryptocurrency perpetual contract rate arbitrage into the stablecoin system, making its stablecoin returns significantly higher than short-term Treasuries, demonstrating innovativeness and product-market fit. However, in terms of absolute scale and application scenarios, these stablecoins' scale and influence remain relatively small; in users' minds, they are primarily used as yield-generating tools and do not pose a significant threat to USDC in the short term.

Other Compliant Issuers: Including Paxos' USDP, and BUSD, which was launched by Binance but halted in 2023 due to regulatory pressure. Despite holding a U.S. trust charter and high compliance levels, institutions like Paxos still lag behind Circle in market promotion and ecosystem development. Since 2025, compliant stablecoin projects have rapidly emerged, such as WLFI's USD1 (circulating over 25 billion), the Plasma project governance token XPL reaching a pre-market cap of over 7 billion, Ethena's introduction of the fiat-backed stablecoin USDTB (with circulation exceeding 16 billion), and more small and medium-sized projects continue to enter the market.

In conclusion, leveraging USDC, Circle has established a certain first-mover advantage in terms of compliance capability and ecosystem partnerships. However, as the regulatory framework for stablecoins becomes increasingly clear, and more participants join the competition, Circle is facing an increasingly fierce market environment.

4.3 Regulatory Environment and Policies

The transition of stablecoins from "wild growth" to "regulatory inclusion" is the general trend. The 2022 Terra stablecoin incident raised global regulatory concerns, prompting countries to explore regulatory frameworks.

In July 2025, the U.S. Congress passed the "Guiding and Encouraging Novel Innovations in U.S. Stablecoin Ecosystem Act" (GENIUS Act). This legislation established a federal regulatory framework for payment-type stablecoins. The act:

Requires a 1:1 full reserve for stablecoins and limits holdings to highly liquid assets (such as cash, short-term U.S. Treasury securities, etc.); Requires issuers to publish a monthly reserve composition report and undergo independent audits or reviews, with reserves not to be used arbitrarily or repledged; Requires stablecoin issuers to establish adequate capital and liquidity buffers, robust risk management, to match business scale and risk profile. It prohibits direct payment of interest or returns to holders to avoid stablecoins being treated as deposits or securities. It specifically excludes direct regulatory authority over payment-type stablecoins from securities and commodity regulators such as the SEC and CFTC, with regulatory oversight shared by bank regulators (Federal Reserve, OCC, FDIC, etc.) and state financial regulators.

Overall, the GENIUS Act sets the compliance baseline for U.S. federal-level stablecoins, with clear provisions on issuer qualifications, reserve asset transparency, and redemption obligations. The GENIUS Act will be fully implemented 18 months after coming into effect at the end of 2026, and unapproved entities thereafter will not be able to issue payment-type stablecoins in the U.S.

It is foreseeable that the GENIUS Act will eliminate issuers with poor qualifications and promote industry survival of the fittest. For Circle, due to its adherence to high compliance standards (holding 46 state money transmission licenses, New York BitLicense, licenses in Bermuda, the UK, etc.), the new federal licensing threshold will further highlight its legal and compliance advantages, squeezing the market space of non-compliant competitors.

Outside the U.S., the EU passed the MiCA Act in 2023, bringing stablecoins (referred to as electronic currency tokens) under unified regulation, requiring licensing and meeting reserve and capital requirements. In 2024, Circle became the first global stablecoin issuer to comply with the MiCA framework, paving the way for its expansion into the European market. In Asia, international financial centers like Singapore and Hong Kong are also developing stablecoin licensing systems. The Hong Kong Monetary Authority published guidelines at the end of 2023 to regulate stablecoin issuance and require a 1:1 reserve for Hong Kong Dollar stablecoins. Japan has allowed stablecoin issuance by trust companies. Overall, major jurisdictions are actively introducing stablecoin regulations in competition to ensure financial stability while attracting relevant businesses to operate locally. This policy competition benefits leading enterprises in compliance operations. With a multi-jurisdictional licensing strategy (such as the UK FCA Electronic Money License, Bermuda DABA Digital Asset Business License, etc.), Circle has the ability to quickly enter various compliant markets and seize opportunities in international expansion.

4.4 Industry Trends Outlook

In the coming years, there are several major development trends to watch in the stablecoin industry:

Rapid Market Growth: Ark Invest predicts that by 2030, stablecoins could represent 0.9% of the global M2, with a total volume exceeding $1.4 trillion.

While JPMorgan Chase holds a conservative view, projecting a market cap of $500 billion by 2028, most institutions are more optimistic, believing that stablecoins are still in an early adoption phase and could see a 5–10x growth in the next five years. Particularly, as regulatory frameworks become clearer, traditional financial institutions and markets may widely adopt stablecoins for settlement and liquidity management, such as conducting security settlement pilots and replacing government bond market settlements. Standard Chartered Bank even predicts that the stablecoin market could reach $2 trillion by 2028.

Shift from Trading-Centric to Payment and Commercial Use: Currently, about 94% of stablecoin demand comes from crypto trading and DeFi, with only about 6% used for real-world payments and settlements. With the entry of payment companies like PayPal, integration with networks like Visa, and legislative clarity on stablecoins' status as payment tools, the percentage of payment settlements is expected to gradually increase. A Grayscale report dubs 2025 as the "Summer of Stablecoins," noting that large U.S. companies (Amazon, Walmart, etc.) are also exploring stablecoin applications. In the future, stablecoins may be integrated into e-commerce payments, supply chain finance, gaming, and entertainment, enabling large-scale commercial payment applications.

Deep Integration with Traditional Finance: Stablecoins are increasingly being recognized by traditional financial institutions: giants like JPMorgan Chase and Bank of America are involved in related investments or pilots; trading infrastructure provider DTCC is exploring the use of stablecoins to improve settlement efficiency; U.S. mortgage institutions are even considering including digital assets in borrowers' net worth. Stablecoins may become tools for bank liquidity management in the future, with some banks directly holding USDC as reserve assets. U.S. Treasury officials have also noted the role of stablecoins in purchasing U.S. bonds, implying that policymakers may gradually accept and support stablecoins as a "private-sector complementary" to the U.S. financial system. It can be anticipated that stablecoin issuers may be integrated into payment systems in the future (such as accessing the FedNow real-time payment network by the Federal Reserve), thereby achieving seamless integration between traditional banks and on-chain digital dollars.

Technological Evolution and Multi-Chain Deployment: Stablecoins will expand to more high-performance public blockchains and layer-two networks to meet various scenario needs. USDC is currently issued on over 10 blockchains (including Ethereum, Solana, Tron, Algorand, Arbitrum, etc.). In 2025, new Ethereum Layer 2 solutions and cross-chain protocols are developing rapidly, and Circle has introduced the Cross-Chain Transfer Protocol (CCTP) to facilitate USDC's circulation across different chains. Looking ahead, Circle may issue stablecoins in more currencies (such as Asia-Pacific currencies), or support central bank digital currencies (CBDCs) issued by central banks to connect to its network, further solidifying its position as a global digital currency circulation hub.

In conclusion, the stablecoin industry is transitioning from a period of rapid growth to a new stage of compliant competition. With its leading market share and regulatory advantage, Circle is well positioned in this process. However, the industry is evolving quickly, and the company must continue to innovate and operate prudently to sustain growth in an environment of both opportunities and challenges.

5. Operations and Financial Performance

5.1 Historical Performance Review

User and Usage Growth

Since its launch in 2018, USDC has maintained steady growth and experienced a significant increase in supply during the DeFi boom in 2020 and the bull market in 2021. By the end of 2020, the circulating supply of USDC was around $4 billion, surpassing $42 billion by the end of 2021. Despite the market entering a bearish phase in 2022, the circulating supply of USDC continued to grow to nearly $50 billion.

However, in March 2023, due to the bankruptcy of crypto-friendly banks Silvergate and Signature, USDC faced a liquidity crisis, with redemption demands surging sharply and a brief period of de-pegging. Although the Circle team responded promptly and successfully completed all redemptions, this event caused the USDC circulating supply to plummet from 43 billion tokens to 30 billion tokens within a month.

From 2024 to 2025, driven by favorable regulatory policies and accelerated institutional adoption, the circulating supply of USDC gradually recovered. In March 2025, its circulation reached a historical high of $60 billion. Subsequently, the "Stablecoin Act" (GENIUS ACT) was passed, and the USDC circulation continued to hit new highs, exceeding 72 billion tokens as of the latest data.

On the user side, in 2022, the cumulative on-chain addresses exceeded 8.5 million, with over 1.1 million monthly active addresses. By 2025, the daily active addresses reached around 280,000, and the annual transaction count increased by 118%. On-chain transaction volumes also saw significant expansion: as of mid-2025, the total on-chain transaction volume of USDC in the past 12 months reached around $17.5 trillion, mainly from large-scale transfers on exchanges and DeFi protocols. These data indicate that USDC has become one of the widely used stablecoins in the blockchain ecosystem, with a strong user and ecosystem foundation.

Assets and Liabilities, Cash Flow

Circle's balance sheet structure is relatively straightforward. The largest asset item is the investment corresponding to the USDC reserve, which is offset by an equal amount of USDC liability and is not included in shareholder equity.

Excluding reserve assets, the company's own assets mainly include raised funds and retained earnings from previous years. After raising $1.05 billion in the 2025 IPO, according to the Q2 report, the company's current cash reserves exceed $1.1 billion. Additionally, on August 15, Circle issued 3.5 million new shares at a price of $130 per share, raising $455 million. The company currently has ample cash on hand. Circle has no interest-bearing long-term debt, and its business model requires little to no leverage (reserve assets belong to users and are not considered company borrowings).

In terms of operating cash flow, due to the nature of its USDC business, Circle's daily operational cash flow mainly comes from interest income, which is very healthy. In 2024, operational cash inflows exceeded $1 billion, far exceeding capital expenditures and dividend payments (Circle has not yet paid dividends, and all profits are retained). Therefore, the company's financial structure is robust, with sufficient proprietary funds to withstand market fluctuations or support new business investments.

Revenue and Profit Trends

Circle's revenue can be divided into two main categories: interest income and non-interest income, with interest income (i.e., USDC reserve investment income) overwhelmingly dominant.

Circle's business model essentially revolves around earning income from the interest rate spread between "user deposit costs" and "reserve investment income," similar to banks, so interest rate fluctuations have a significant impact on Circle's revenue.

During the zero interest rate policy implemented by the Federal Reserve in 2020, Circle's total revenue was only $15.4 million, mainly from miscellaneous fees such as transactions. Starting from the second half of 2021, with the expansion of USDC supply and rising interest rates, reserve interest became the core source of revenue, leading to a revenue surge to $84.9 million for that year. In 2022, as interest rates rose rapidly (year-end federal funds rate reached 4.5%) and with USDC circulating supply doubling, the company's annual revenue skyrocketed to $772 million.

In 2023, as the Federal Reserve raised interest rates to above 5% and maintained them at a high level, Circle's full-year revenue doubled further to approximately $1.43 billion. The revenue for the full year of 2024 was $1.676 billion, a year-on-year growth of 15.6%, with the growth rate slowing down. In the first quarter of 2025, the company achieved revenue of approximately $579 million, reaching a historic high. If this pace continues throughout the year, the full-year revenue for 2025 is expected to exceed $2.3 billion, demonstrating strong profitability in a high-interest-rate environment.

Non-interest income (including API service fees, transaction fees, etc.) has always been relatively low, accounting for less than 1% of total revenue. This is because Circle has deliberately made USDC issuance and redemption free of charge to encourage ecosystem usage and has not charged users minting fees. Although this strategy sacrifices some direct revenue, it strongly promotes the rapid expansion of the stablecoin ecosystem. Looking ahead, as payment, API, and other businesses develop, the share of non-interest income is expected to increase, but in the short term, it remains at a low level.

The table below summarizes Circle's key performance data for the years 2020-2024 (all figures in billion USD).

Next, we will analyze in detail the key drivers of Circle's financial metrics:

5.2 Key Drivers

The key drivers of Circle's financial metrics include USDC supply, short-term U.S. Treasury bond interest rate level, and distribution and transaction cost ratio.

5.2.1 USDC Supply

The supply of USDC directly determines the scale of Circle's held reserve, thereby affecting its interest-earning asset base. Circle's revenue is significantly positively correlated with USDC circulation. The change in USDC supply mainly depends on the following two aspects:

(1) Overall market sentiment of stablecoins:

The stablecoin market is booming, and as the current second-ranked stablecoin, the USDC supply naturally rises. Currently, the main driving factor of the stablecoin market is still the cryptocurrency bull and bear market cycles. In a bull market cycle, cryptocurrency trading and DeFi activities are active, stablecoin demand increases, driving the expansion of USDC supply; the opposite is true in a bear market.

(2) USDC's own competitiveness:

If USDC itself has a more obvious advantage over other stablecoins, it will increase USDC's share of the stablecoin total, thereby increasing USDC's supply. If Circle can leverage its advantages in compliance, transparency, etc., and seize the opportunities brought by regulatory policies to expand its applications in traditional financial scenarios, the proportion of USDC's supply scale to the total stablecoin volume is expected to further increase.

USDC Supply Trend Source: theblock

Currently, the cryptocurrency market is overall in an upward trend from 2023 to 2025, providing continued growth momentum for stablecoins like USDC; demand from payment and other sectors is also growing steadily, and the overall market sentiment of the stablecoin market will continue to rise further in the future. USDC's own competitiveness has gradually improved with the gradual clarification of regulatory policies, relative to its main competitor USDT. At the same time, USDC has recently started frequent collaborations with centralized exchanges, increasing USDC's willingness to be held through operations (providing interest to exchanges to indirectly return part of reserve interest to users), enhancing USDC's competitiveness. Both factors will drive the increase in USDC supply.

5.2.2 Short-Term Treasury Bill Rate Level

The short-term Treasury bill rate is another key variable that determines Circle's interest income. The aggressive rate hikes by the Federal Reserve in 2022–2023, raising the rate to 5.25%, will drive Circle's effective average yield in 2024 (net of non-interest-bearing cash) to 2.68%. Excluding Coinbase's revenue share, this yield corresponds to an overall return rate on reserve assets of about 5%, closely mirroring the concurrent 3-month U.S. Treasury bill rate.

U.S. Dollar SOFR Trend (Secured Overnight Financing Rate)

By comparing the USDC supply, short-term rate level, and Circle's income, we can see that compared to the changes in USDC supply, rate changes are more pronounced, making rate fluctuations have a more significant impact on Circle's operating income. For example, despite the USDC supply for the full year of 2023 being considerably lower than in 2022, Circle's revenue doubled from 2022 due to the rapid rate increase; despite the 2024 USDC supply being higher than in 2023, the revenue for Circle in 2024 only increased by 15% over 2023 due to the rate starting to decline.

Looking ahead, there is some uncertainty in the rate trend, but the market generally expects to enter a rate-cutting cycle. According to an ARK report, if the Federal Reserve starts cutting rates from 2025 by 2 percentage points to around 3%, Circle's annual interest income could decrease by approximately $631 million (based on 2024 data), turning net profit from a $156 million profit to a $475 million loss. This demonstrates that a rate decrease significantly affects Circle's profitability. Conversely, if rates remain high or continue to rise, Circle's profits will rapidly expand.

It is widely expected that the Federal Reserve will gradually cut rates to a neutral level (around 2–3%) in 2025–2026, indicating that Circle's interest income growth rate may slow down, or even experience an absolute decline.

5.2.3 Distribution and Transaction Cost Ratio

Distribution and Transaction Costs are Circle's most significant direct cost items. In 2024, this expense amounted to $1.01 billion, representing 60% of the company's total revenue. Of this amount, the fee paid to key partner Coinbase as a revenue share reached $908 million, accounting for 54% of total revenue. Distribution and Transaction Costs mainly include USDC distribution incentives to partners, on-chain transaction-related expenses, and reserve asset management fees.

Coinbase Revenue Share Mechanism

The majority of the USDC distribution incentives flow to Coinbase, stemming from the two parties' long-standing and intricate partnership. The current partnership agreement is valid from August 2023 to August 2026, with the possibility of renewal or adjustment upon expiration. The revenue share mechanism can be summarized as follows: Coinbase first receives a proportionate share of the net earnings based on the USDC it custodies, then receives 50% of the remaining net earnings. Specific terms include:

1. Firstly, determine the payment base, which is based on the daily income generated by the reserves supporting USDC, net of third-party management fees (such as asset management and custody fees) and other related expenses.

2. Circle retains a certain percentage of the revenue (annualizing around 0.08% to 0.2%, from low-double-digit basis points to high tenth of a basis point) to cover the indirect costs of issuing the stablecoin and managing reserves, such as accounting, finance, regulatory, and compliance.

3. Coinbase receives a daily share of the payment base net earnings based on the proportion of USDC held in its custodial or managed wallets. For example, if Coinbase custodies 20% of the USDC, it first receives 20% of the payment base.

4. After deducting the amounts payable to other approved participants (such as Binance, Bybit, etc.), Coinbase also receives 50% of the remaining payment base.

Actual Revenue Share Scenario:

- In 2022–2024, Coinbase's weighted average USDC custody proportions were 3%, 8%, and 18%, respectively.

- During the same period, Coinbase received revenues from Circle amounting to $2.481 billion, $6.913 billion, and $9.079 billion, representing the vast majority of Distribution and Transaction Costs.

- From 2022 to 2024, Circle's reserve revenue was $7.359 billion, $14.306 billion, and $16.611 billion, with Coinbase's share being 33.7%, 48.32%, and 54.65%, respectively.

In the first quarter and first half of 2025, data shows that Coinbase held 7.594 billion and 7.275 billion USDC, accounting for 12.6% and 11.86% of the circulating USDC at the time, respectively, a decrease from the 2024 average level. It is expected that Coinbase's average custody ratio in 2025 will be between 11.8% and 12.3%, and its revenue share of Circle's reserve revenue is expected to remain between 50% and 53%.

Partnership with Other Exchanges

In addition to Coinbase, Circle is also actively expanding other distribution channels. In November 2024, Circle entered into a two-year strategic partnership with Binance, paying a one-time fee of $60.25 million and agreeing to monthly incentive payments.

The incentive payment is based on the amount of USDC held on the Binance platform and in its treasury, calculated as a certain percentage (in the form of an annualized interest rate) based on the three-month SOFR rate (approximately equal to Circle's reserve yield), reset quarterly at a discount to SOFR. The incentive rate increases as Binance's USDC holdings increase, ranging from a "mid double-digit percentage to a high double-digit percentage" of the benchmark rate.

For example, assuming the current quarter's benchmark rate, adjusted for the discount, is 5%:

- If Binance holds 30 billion USDC (as agreed), the incentive rate is approximately 50% of the benchmark rate (mid double-digit percentage), resulting in an annualized incentive rate of 2.5%. Circle would need to pay approximately $75 million to Binance each year.

- If the holdings increase to 48 billion USDC, the incentive rate can reach 80% (high double-digit percentage), with an annualized incentive rate of 4%, requiring Circle to pay around $216 million annually.

The agreement stipulates that Binance must hold no less than 1.5 billion USDC and typically more than 3 billion USDC. In essence, under this collaboration, Binance can also earn reserve interest based on the proportion of USDC it holds relative to the total USDC circulation, but unlike Coinbase, Binance cannot receive the full reserve interest. Instead, it can only receive a "mid double-digit to high double-digit percentage" of the reserve interest. According to the latest reserve data, Binance holds 8.15 billion USDC, accounting for 11.3% of the circulation, far exceeding 3 billion USDC, and is expected to receive a share at the "high double-digit percentage" rate. In July 2025, Circle also reached a similar USDC revenue-sharing arrangement with Bybit, with specific details not disclosed.

Partnering with exchanges has become a primary way for Circle to expand the circulation of USDC by incentivizing partners to hold and promote USDC in exchange for a portion of the reserve interest. While this strategy has been effective in scaling USDC, it has also significantly redirected Circle's interest income.

From a shareholder perspective, Circle could retain the interest income of USDC, primarily the portion held by on-chain decentralized exchanges, which directly impacts the company's EBITDA. Notably, the decentralized derivatives exchange Hyperliquid currently holds approximately 7.5% of the total USDC circulation, making them a favored USDC holder among Circle shareholders. However, Hyperliquid has recently started openly soliciting teams to develop its proprietary stablecoin, USDH, which could significantly affect the amount of USDC held by Hyperliquid.

In conclusion, Circle's distribution and transaction costs may further increase in the future. We anticipate that by 2025, this cost as a percentage of reserve revenue will reach 60%–63% (38.99%, 50.31%, 60.85%, and 60.08% for 2022–2024 and Q1 2025, respectively). This will continue to squeeze Circle's profit margins, putting pressure on the company's overall profitability.

On-Chain Transaction Costs

On-chain transaction costs primarily include the Gas fees, custody fees, and fees paid to the underlying blockchain protocol that Circle incurs to support USDC's operation in a multi-chain environment. While this cost is relatively small compared to the large interest spreads (usually a few percentage points of revenue), the specific amount is influenced by the congestion of the blockchain network and can fluctuate. For example, during network congestion on the Ethereum mainnet, significant Gas fees are required for large-scale USDC minting and burning operations.

To address these expenses, Circle holds approximately $31 million in crypto assets on its balance sheet specifically to cover on-chain transaction costs. Looking ahead, with the gradual launch and adoption of Circle's proprietary blockchain ARC, on-chain transaction efficiency is expected to improve, leading to a significant reduction in related costs.

Reserve Management Fees

Circle partners with BlackRock to manage the reserve assets of USDC. Under the latest agreement, BlackRock is responsible for managing around 90% of USDC reserves and has committed to prioritizing support for Circle's stablecoin business. In return, BlackRock charges investment management and custody fees based on the asset under management, totaling approximately $100 million annually.

The fee is financially recognized as part of the transaction cost, essentially eroding a portion of the stablecoin asset's yield, accounting for approximately 6% of Circle's total revenue in 2024. If the future USDC scale continues to expand and market rates enter a downward cycle, BlackRock's management fee (charged based on asset size) as a proportion of revenue may increase, as fees are charged based on managed assets, while interest income is directly proportional to the interest rate.

Overall, assuming that Circle's distribution and transaction costs remain unchanged following the renewal of the revenue-sharing arrangement with Coinbase in 2026, we expect Circle's distribution and transaction cost as a percentage of revenue to slowly increase from 60% in 2024 to maintain between 60% and 63% by 2028. This proportion bears some uncertainty: if the cost rate may remain high if the incentive to expand circulation through partnerships with centralized exchanges continues, while increasing the direct user ratio would help reduce costs.

For Circle, every one-percentage-point change in the distribution cost rate will have a significant impact on the overall profitability. Therefore, the company needs to strategically balance ecosystem expansion and profit equilibrium, actively achieve long-term cost control through technological upgrades (such as the ARC Chain) and optimized partnership structures.

5.2.4 Summary and Outlook

Among the three core driving factors affecting Circle's financial performance — USDC supply, short-term USD interest rate levels, and distribution and transaction costs, we believe that only the USDC supply is expected to show positive growth trends in the future.

A decrease in short-term USD interest rate levels will directly result in a reduction in Circle's interest income. In an extreme scenario, if the Federal Reserve were to reimplement the zero-interest-rate policy of 2020-2022 in the future, Circle's revenue based on the current business model would significantly shrink, requiring the company to seek other sources of income for sustainable operation.

Furthermore, under the existing promotion strategy centered around exchange partnerships, an increase in USDC supply often comes with a simultaneous increase in distribution costs. Even without considering interest rate changes, a situation may arise where the "revenue growth rate is lower than the USDC supply growth rate," continuously squeezing profit margins.

In conclusion, we maintain a cautious to negative outlook on Circle's revenue prospects for the next three years. The company urgently needs to expand non-interest income sources, optimize partnership structures to control distribution costs, and actively address the challenges brought about by the downward interest rate cycle.

5.3 Other Financial Matters

Due to Circle's lack of long-term debt and complex derivative exposure, interest expenses and investment gains/losses have a limited impact on the company's profit. However, notable are its holdings of strategic investments and crypto assets. For example, Circle has held a certain amount of Bitcoin, Ethereum, and other digital assets as liquidity reserves or long-term investments, and has invested in several blockchain startups. The fluctuations in the fair value of these assets may result in gains or impairments on the balance sheet. During the significant downturn in the crypto market in 2022, Circle recognized tens of millions of dollars in impairment losses on digital assets, leading to negative other comprehensive income for that year. It should be noted that such gains or losses are mainly non-operational items, and when the crypto market as a whole is on the rise, these assets are also expected to bring unexpected gains, boosting the company's profit.

In addition, as Circle progresses in its application for a banking license, if ultimately approved, the company may need to meet certain capital requirements and book corresponding reserves, which may have a slight impact on return on equity. On the other hand, under the federal regulatory framework, Circle may need to further segregate USDC reserve assets, and may even incorporate some reserves into on-balance sheet management by banks. The specific policy implications are still to be clarified further and have not yet been included in financial projections.

6. Competitive Advantage and Moat

As one of the pioneers in the global stablecoin field, Circle's ability to outperform in the competition and successfully go public is attributed to its unique competitive advantage and established "moat." This is reflected in the following aspects:

Compliance and Trust Advantage:

Circle's core moat lies in its strict compliance and the broad trust established as a result. In the stablecoin industry, users are extremely sensitive to whether the issuer can sustain the 1:1 peg. Since the launch of USDC, Circle has always adhered to high compliance standards, insisted on licensed operation, monthly reserve disclosures, and subjected itself to audits by a top-tier accounting firm. This level of transparency far exceeds its main competitor Tether, which has often faced market scrutiny due to insufficient disclosure.

Currently, Circle has obtained money transmitter licenses in most U.S. states, the New York BitLicense, as well as relevant licenses in jurisdictions such as the UK and EU, becoming one of the few crypto companies globally to hold licenses across multiple jurisdictions. The company has also applied for a U.S. national trust bank charter, and if approved, will be subject to regulation similar to traditional banks. This series of compliance actions has removed barriers for its expansion to large institutional clients (such as banks, publicly traded companies, etc.) — these institutions are more likely to choose the compliant, transparently regulated USDC over stablecoins issued by entities based overseas with lower regulatory transparency.

It is foreseeable that with the clarification of the regulatory framework for stablecoins in the United States and other countries, Circle will be the first to obtain a license based on its compliance foundation, while some non-compliant competitors may be forced to undergo structural adjustments or exit the market. This compliance moat is difficult to replicate in the short term and relies on long-term compliance investment and a good reputation. Trust itself is a form of "currency," and Circle, with its leading position in trust, has not only won user loyalty but has also positioned USDC as a "safer haven" in times of market crisis. For example, during the brief period of USDC's disanchoring in March 2023, most users still expected Circle to receive official support, based on the long-standing compliance reputation it has built.

Technological and Product Advantages:

Although the stablecoin itself follows a simple 1:1 anchoring mechanism, its surrounding technological infrastructure and service ecosystem constitute important competitive barriers. Over the years, Circle has built a mature and reliable technical system in areas such as digital wallet custody, cross-chain transfers, and payment APIs.

For example, Circle's developed Cross-Chain Transfer Protocol (CCTP) achieves intermediary-free USDC cross-chain transfers through an atomic destruction/minting mechanism. The protocol's technological implementation is complex, but Circle has not only successfully implemented it but has also open-sourced it, enabling USDC to maintain uniformity and liquidity in a multi-chain environment while strengthening the industry's ecosystem.

In addition, Circle's payment API and enterprise account system are not just simple interface services but comprehensive solutions that integrate KYC processes, fiat settlement, and compliance mechanisms, showcasing the team's deep integration and profound understanding of financial business and blockchain technology. Competitors looking to provide a similar level of service not only need to have cross-disciplinary technical capabilities but also need to undergo long-term market validation. This "full-stack service capability" allows Circle to win enterprise customers as a solution provider—rather than just a token issuer—and build an invisible moat of product and technological advantage.

Brand and Market Acceptance:

Through years of honest operation and continuous market education, Circle has established a strong brand awareness and reputation asset in the industry. USDC has almost become synonymous with a "safe, transparent stablecoin," especially widely accepted in the U.S. and European markets. When enterprise users choose financial tools, they tend to favor brands they are familiar with and trust, which is exactly the soft power that Circle possesses.

For example, even after PayPal introduced its own stablecoin, PYUSD, it chose to support USDC within its ecosystem, reflecting that even competitors have to acknowledge USDC's market position. In addition, Circle has received public recognition from top-tier investment institutions, including BlackRock and ARK, further consolidating market confidence. This brand value cannot be quickly gained through short-term subsidies or capital investment but requires long-term accumulation and maintenance. Unless a major trust crisis occurs, Circle's brand moat will continue to play a role in customer decisions.

Network Effect

The stablecoin business exhibits a strong network effect, with USDT currently being the stablecoin with the strongest network effect. USDT is the largest settlement tool within centralized cryptocurrency exchanges, giving USDT a solid moat, while Circle's current market position allows it to to some extent benefit from this network effect.

On one hand, USDC has gained support from nearly all major cryptocurrency exchanges, wallet services, and DeFi protocols, becoming a fundamental liquidity component within the crypto ecosystem. When developers issue tokens or launch new projects (especially on-chain projects), they often choose to integrate USDC first, even ahead of USDT, in order to leverage its widespread user base, high liquidity, and compliance advantages. In the current round of activity on blockchains like Solana, Avalanche, and Hyperledger, the predominant on-chain stablecoin is USDC (at 69.16%, 89.65%, and 95.15% respectively). This broad integration in itself acts as an industry barrier, as emerging stablecoins need to invest significant time and resources to achieve a similar level of ecosystem penetration.

On the other hand, Circle has been continuously expanding its partnership network through collaborations with internationally renowned institutions, creating a "flywheel effect." The company has partnered with Visa and Mastercard to advance stablecoin payment applications, collaborated with MoneyGram to enable offline exchanges, and partnered with the Bank of New York Mellon to provide asset custody services. These partner institutions are usually of substantial size and resources, and their support significantly expands the use cases for USDC. For instance, as early as 2021, Visa piloted the use of USDC for cross-border credit card settlements, marking the first time a stablecoin was integrated into the traditional payment network. With more industry giants joining Circle's ecosystem, new entrants find it challenging to receive the same level of support. The network effect makes scale itself a moat: the more users and applications USDC has, the greater its utility value, attracting more users and creating a positive feedback loop.

Sustainability of the Moat:

Although the aforementioned advantages position Circle favorably in the current competition, its moat is not unassailable and requires the company's continuous investment to maintain and expand:

- Regulatory advantages may gradually become standardized: As the industry's regulatory framework matures and becomes more uniform, compliance may shift from a differentiating advantage to an industry entry barrier. Once competitors also achieve full compliance, Circle will need to stay ahead through superior service and product experiences.

- Network Effect Should Be Supported by Use Case: If application expansion stalls, latecomers may try to attract users through incentive strategies (such as providing interest or lower fees). Although U.S. regulations prohibit stablecoins from directly paying interest to users, in practice, as mentioned above, stablecoin issuers usually indirectly pay interest to users through exchanges, and Circle itself has also invested significant distribution costs in this regard.

- Ongoing Investment in Technological Leadership: Blockchain technology evolves rapidly, and Circle must maintain a leading position in performance, security, and new features; otherwise, it may be surpassed by more agile competitors.

- Long-Term Maintenance of Brand Reputation: The company must resolutely avoid any events that could damage trust, adhere to transparent operations and communication to maintain market confidence.

Overall, Circle's current moat in the stablecoin industry is in the top tier, strongly supporting its market position in the next few years. If it can successfully leverage its compliance advantage to expand into the traditional financial sector, its moat will further widen, achieving the "rich get richer" Matthew effect. However, strategic mistakes or poor management could weaken its existing advantages. Therefore, Circle needs to continuously strengthen compliance, deepen partnerships, maintain technological leadership and brand reputation to sustain its leadership position in the stablecoin standardization process.

7. Key Risks and Challenges

1. Interest Rate Dependency Risk

Circle's revenue structure is highly dependent on the U.S. dollar's short-term interest rate level, with interest income accounting for as much as 99% of total revenue in 2024. This concentration implies that once the U.S. enters a rate-cutting cycle, the company's revenue and profits will face a steep decline risk. The market widely expects the Fed to begin rate cuts in 2025–2026; if so, Circle's profitability could see a significant drop from the peak in 2024.

In the long term, if the global economy returns to a low-interest-rate environment (like the 2010s), Circle needs to explore non-interest income sources; otherwise, the sustainability of its business model will be challenged. Additionally, interest rate dependency also makes the company's valuation highly sensitive to macro data—any inflation below expectations or dovish signals from the Fed could trigger market concerns about profit decline, further exacerbating stock price volatility. To address this risk, Circle needs to actively expand non-interest businesses, optimize profit-sharing mechanisms, and set aside profit reserves during high-rate periods to prepare for future downturns. However, these measures have limited short-term effectiveness, and interest rate risk remains a significant uncertainty factor that investors must face.

2. Competition and Substitute Risk

Despite Circle's leading position in the compliant stablecoin sector, the evolving dynamics of the competitive landscape may still pose a threat to its market share and growth:

- Existing Competitors: Tether (USDT) still holds a larger user base and deeper liquidity pool, maintaining dominance in certain markets (especially in regions with lower compliance sensitivity). If Tether improves its operational transparency or adjusts its strategy, Circle's challenge to capture market share will intensify.

- New Entrants: PayPal has introduced PYUSD and is steadily promoting it leveraging its massive user and merchant network; several banking institutions are also exploring issuing their own stablecoins. If these participants leverage their existing ecosystems to achieve rapid penetration, they could erode Circle's use case in the payment space. Emerging alternative solutions: including innovative products like Ethena USDe, which claims to be fully compliant and backed by government bond yields, could attract user diversion if they offer higher yields.

- Central Bank Digital Currency (CBDC): If the US or EU launches an official digital currency and promotes its usage through policy guidance, it could squeeze out the market space for private stablecoins. Although the industry generally believes that CBDCs and stablecoins will coexist, caution is still needed against the structural impact brought about by policy bias.

- Technological Disruption: Emerging technological solutions such as decentralized stablecoins, if they manage to overcome the challenge of achieving price stability without fiat reserves (despite the current high difficulty level), could fundamentally challenge Circle's business model.

Facing the above competition, Circle needs to continuously strengthen product experience, deepen customer relationships, provide differentiated enterprise services, actively monitor industry technological advancements, and adjust strategic direction when necessary, such as actively participating in CBDC ecosystem cooperation to maintain competitiveness in the evolving market.

3. Policy and Regulatory Risk

The uncertainty of the regulatory environment was previously a major risk for the entire stablecoin industry, but after the successful legislation of the GENIUS Act in the US, this risk has been significantly reduced, although there are still certain variables in the specific implementation of the law. However, the gradual implementation of regulations will inevitably increase Circle's compliance costs, thereby reducing its profit margin.

Changes in the political environment are also worth noting. Currently, the US government's policies are relatively business-friendly, but if there is a change in the ruling party in the future (such as a potential Democratic government after 2028), the policy direction may shift towards stronger regulatory scrutiny, or even the introduction of a CBDC to squeeze out the development space of private stablecoins. At the international level, some countries may implement restrictive policies on USD stablecoins to maintain their currency's position or financial stability. Regulations restricting the use of USDC enacted by major economies such as the EU and India would directly impact Circle's globalization strategy.

Overall, the current regulatory environment for stablecoins is the best in Circle's history. However, any policy reversal or significant tightening of regulations could directly impact its business expansion and market confidence. Therefore, Circle needs to actively engage in policy discussions, adjust its compliance strategies in a timely manner, and reduce reliance on a single policy environment through diversification (such as applying for a banking license and exploring CBDC partnerships).

4. Credit and Operational Risks

As a financial services company, Circle also faces various operational risks that could significantly damage the company's credit and user confidence:

- Reserve Asset Risk: While Circle allocates reserve assets to cash and short-term U.S. treasuries, in extreme scenarios (such as a U.S. treasury market liquidity crisis or sovereign debt default), it may still face difficulties in asset liquidation or pressured sell-offs at a discount.

- Banking Partner Risk: Reserve assets are held at Global Systemically Important Banks (GSIBs), which are relatively secure but not without risk (e.g., the 2023 Credit Suisse event). If a partner bank faces a crisis, it could temporarily freeze Circle's funds, triggering market panic.

- Technology and Security Risk: This includes risks such as hacking attacks, smart contract vulnerabilities, system failures, which could lead to fund losses or USDC operational anomalies. Despite Circle's good security track record, no system is completely immune to risks, and continuous investment is required to maintain technological leadership and reliability.

- Compliance and Internal Control Risk: Lapses in areas such as Anti-Money Laundering (AML), sanctions compliance, etc., could lead to regulatory penalties and reputational damage; financial disclosure errors or internal control failures can also affect market trust.

Circle has established redundant reserve mechanisms and emergency financing arrangements to enhance risk resilience. However, as stablecoin business heavily relies on market confidence, a major operational risk event could still trigger a run, so the company must remain highly vigilant and continuously improve its risk management system.

5. Market Volatility and Macroeconomic Risks

Circle's business performance is highly correlated with cryptocurrency market volatility and the macroeconomic environment:

- Cryptocurrency Market Cycles: A significant market downturn (e.g., the 2022 Terra crash) could lead to large-scale redemptions of stablecoins by users, causing a contraction in USDC supply and directly reducing interest income base. Conversely, a bull market will result in rapid scale expansion but also place higher demands on operational management capabilities.

- Macroeconomic Changes: If the U.S. economy were to fall into a recession, investors' risk appetite might decrease, potentially reducing their allocation to crypto assets and stablecoins; meanwhile, an economic downturn usually comes with interest rate cuts, further squeezing Circle's interest income.

- US Dollar Status Changes: Despite stablecoins expanding the dollar's international influence at this stage, if the trend of "de-dollarization" accelerates, it could have a long-term impact on the demand for dollar-denominated stablecoins.

- Exchange Rate and Inflation Risks: A significant appreciation of the U.S. dollar could increase the cost for overseas users to use USDC; high inflation, while pushing up interest rates, could also dampen economic growth, negatively affecting payment activities.

6. Legal and Reputational Risks

As the company goes public and scales up, Circle may face more legal challenges such as patent lawsuits, consumer class actions, etc. Any negative publicity or public disputes could damage its brand image. Especially as a public company, the market has higher expectations for its trustworthiness and transparency, and any USDC de-pegging or reserve disclosure issues could quickly erode market confidence.

Risk Management Outlook

To address the above risks, Circle has taken several measures, including actively engaging in regulatory communication, maintaining a high liquidity reserve policy, purchasing appropriate insurance, implementing real-time risk monitoring systems, and establishing a Board Risk Committee to strengthen governance. In the future, the company can enhance its overall risk resilience through business diversification (such as issuing multi-currency stablecoins, expanding non-interest income), expanding into multiple regional markets, increasing technology investments, and compliance development. Additionally, ample capital (from IPO and retained earnings) provides a significant buffer for the company to withstand potential shocks.

8. Stock Lock-up and Unlocking Situation

Circle officially went public on June 5, 2025, with an initial total share capital of 227.6 million shares, a float ratio of 17.2%, with the rest under lock-up. The post-IPO stock situation is as follows:

Percentages based on 227.6 million "total outstanding common shares (including Class A 207.6M + Class B 20.0M),"

excluding potential dilution (unvested RSUs, option pool, etc. ≈ 25–30M).

Unlocking Schedule

Regarding the unlocking schedule, as stipulated in the prospectus, it is as follows: "All locked-up shares may be sold 180 days after the date of this prospectus, or on the second trading day after the company submits its Form 10-Q for the third quarter of fiscal year 2025 to the SEC and publicly discloses its performance, whichever is earlier."

The prospectus is dated June 4, so 180 days after the date of this prospectus is December 1;

Since the majority of U.S. stock companies report their Q3 earnings in mid-November, the likely unlocking time for the restricted shares is "the second trading day after the company submits its 2025 Q3 Form 10-Q to the SEC (or simultaneous press release/conference call)," with the latest date being December 1.

For example, if Circle announces its Q3 earnings on November 13, 2025 (a Thursday) after market close:

- T+1 = November 14 (a Friday)

- T+2 = November 17 (a Monday)

→ Unlocking Effective: November 17, 2025

On August 15, 2025, Circle also conducted a public stock offering at $130 per share, intending to issue 2 million new shares and allow existing shareholders to sell 8 million shares. Ultimately, under the greenshoe option, 3.5 million new shares were successfully issued, and existing shareholders also successfully sold 8 million shares.

Below is the information on shareholders holding more than 2% of the shares, including their sale information on August 15:

It can be seen that the majority of shareholders holding over 2% of the shares have an average cost of less than $10 and an investment duration of over 10 years. There is a strong demand for cashing out after the unlocking in November, which may exert additional pressure on Circle's stock price.

9. Valuation

9.1 Current Valuation Level

IPO and Current Market Value:

Circle successfully IPO'd on the New York Stock Exchange on June 5, 2025, at an offering price of $31 per share, raising approximately $1.05 billion, resulting in an IPO market cap of around $6.9 billion. The market was highly enthusiastic on the first day of trading, with the stock opening at $69, closing at $83.23, representing a roughly 168% increase from the offering price. Over the following weeks, Circle's stock price continued to surge, reaching nearly $299 intraday on June 23, 2025, up over 860% from the IPO price. This price corresponds to a fully diluted market cap exceeding $83 billion, reflecting the market's fervent expectations for the stablecoin business's future.

As market sentiment has cooled down, Circle's stock price has experienced a significant pullback over the following months. As of the close on September 15, 2025, Circle's stock price has retreated to $134.05. Based on an estimated total share count of around 232 million shares (including the new shares issued on August 15 but excluding potential shares that may be released due to future equity incentive provisions), the current stock price corresponds to a fully diluted market cap of approximately $31.1 billion. This latest valuation still reflects the market's strong expectations for Circle's future growth.

Valuation Multiples:

- Static Valuation: Based on the full-year 2024 performance (with revenue of about $16.8 billion and net profit of only about $156 million cls.cn), a $31.1 billion market cap implies a Price-to-Earnings (P/E) ratio of around 199x and a Price-to-Sales (P/S) ratio of approximately 18.5x. Such high multiples far exceed the average valuation levels of traditional financial and technology companies. Circle just achieved full-year profitability in 2024 with a very low net profit base, making it difficult to support such high valuation multiples.

- Forward-looking Valuation: According to the latest Q2 financial report data, Circle's revenue and Adjusted EBITDA have both seen significant growth, with year-over-year increases of 53% and 52%, respectively. However, due to the IPO-related non-cash expense impact of $591 million (mainly including a $424 million stock-based compensation expense), Circle is likely to have a negative full-year net profit. Taking into account performance growth factors, assuming an optimistic scenario with a 58% revenue increase in 2025 to reach $26.6 billion, the current stock price corresponds to a Forward P/S (Forward Price-to-Sales) ratio of around 11.7x. This indicates that the market has given Circle a significant premium, mainly based on seeing it as a scarce target of crypto financial infrastructure, betting on its long-term profit surge potential and the substantial growth of its future stablecoin business. The high valuation also means that investors have already priced in a considerable portion of the company's future growth expectations in advance, and the short-term stock price volatility and pullback risks cannot be ignored.

9.2 Comparable Company Valuation Comparison

There is no company in the public market that can be directly compared to Circle, which is a key reason for Circle's current scarcity valuation premium. We have selected some relevant companies in related industries for reference:

- Coinbase (COIN): As a cryptocurrency exchange, although the business model is different from Circle's, it is similarly impacted by the cryptocurrency industry's dynamics.

- Visa, Mastercard: As traditional payment giants, their 2025 expected P/E ratios are in the range of 25–30×, representing the valuation level of mature payment networks (with a historical net profit margin of around 50%). With their near-duopoly position and strong performance, Visa and Mastercard have long enjoyed a high and stable valuation premium. However, although Circle operates in the payments ecosystem, it does not currently generate revenue through transaction fees like Visa and Mastercard, making it not a perfect comparable.

- U.S. Banking Industry: Circle's core business is net interest income, similar to banks. Looking at the average level of U.S. banks, the current P/E ratio is generally below 10×, with a P/S ratio of around 1×, reflecting the slow growth and steady profitability of traditional financial institutions, but lacking significant upside in valuation.

We used metrics such as P/E, P/S, EV/Revenue, EV/EBITDA to compare Circle with Coinbase, PayPal, Visa, Mastercard, and U.S. traditional banks from multiple angles, and obtained the following data:

Calculation and Scope: Market cap and stock prices as of the close on 2025-09-15

*Taking into account the impact of IPO expenses on Circle's 2025 profit data, the net profit margin and PE corresponding data for Circle are taken from 24Q2-25Q1, while its EBITDA is based on the adjusted rolling EBITDA (adjusted EBITDA-TTM), and the rest of the stocks are based on the latest rolling data (24Q3-25Q2). Circle's actual trailing 12-month rolling net profit remains negative.

From the table, it can be seen that although Circle's stock price has dropped by over 50% from its peak, it significantly outperforms the comparable companies mentioned earlier in most dimensions, while Circle's net profit margin is also significantly lower than theirs. Circle's EV/Revenue is around 14 times, close to the level of industry giants such as Visa and Mastercard; however, Circle's profitability is not yet sufficient to support such a high revenue multiple, reflected in an EV/EBITDA of 102, far higher than Visa (~26x) and Mastercard (~29x).

9.3 Scenario Analysis

To understand the potential valuation range of Circle, we have designed three scenarios — pessimistic, baseline, and optimistic — to project Circle's financial performance and corresponding valuation in 2028. Key variables in the scenarios include the circulation scale of USDC stablecoin, market interest rate levels, distribution and transaction costs, market share, and competitive landscape. The specific assumptions and results of each scenario are as follows:

Pessimistic Scenario:

Assumes a resurgence of stablecoin regulation; simultaneous global economic slowdown with the Fed aggressively cutting rates to near zero in 2026–2028, with short-term rates averaging only about 1%. In this environment, competition intensifies, with traditional payment players like PayPal eating into the market share, USDC growth slowing, and market share declining.

Key Assumptions:

- By 2028, USDC circulation reaches only about $800 billion (annual growth rate below 5%);

- The average yield on Circle's reserve is only 1.0% (rates mostly near zero);

- Coinbase's interest split remains at 50%, distribution costs stay around 60%, and the net margin remains around 10% as in 2024.

Financial Impact:

- Estimated 2028 revenue for Circle is around $800 million, significantly lower than in 2024;

- Due to the rigid growth in operating costs, net profit may be close to breakeven or achieve only a slight profit of $0–1 billion.

Valuation Projection:

In this scenario of performance decline, the market's P/E valuation multiple may be only around 20×, corresponding to a 2028 market cap of around $2 billion, which is less than 10% of the current valuation. Even with a certain degree of growth premium considered, the valuation under the pessimistic scenario is far below the current level. This implies that if this scenario occurs, Circle's stock price could drop significantly, posing a downside extreme scenario that investors need to be cautious about.

Baseline Scenario:

Assumes Circle successfully obtains a federal trust charter, with USDC maintaining robust growth under compliance. On the macro front, the U.S. economy achieves a soft landing, and the interest rate environment gradually returns to a neutral level from 2025–2028 (with short-term rates around 2.5%). In terms of the competitive landscape, USDC maintains its leading stablecoin position due to compliance advantages, with a slight increase in market share.

Key Assumptions:

- By 2028, USDC's circulating supply will reach approximately $150 billion (CAGR of about 25% from 2025 to 2028);

- Circle's average reserve yield is about 2%;

- With economies of scale, the net margin is increased to 15%.

Financial Impact:

- Estimated 2028 revenue for Circle is about $3 billion;

- Net profit is around $450 million, roughly a 3x increase from 2024.

Valuation Derivation:

Assuming a 2028 market awards a growth company about a P/E valuation of 25x, this corresponds to a market capitalization of about $10 billion. This is significantly lower than Circle's current $31.1 billion market cap—indicating that under the base scenario, the current valuation is still relatively high, implying that the market pricing already incorporates more optimistic expectations than just "steady growth." Of course, from another perspective: if we look back to 2028, by then Circle's revenue and profit will have increased significantly, even if the valuation multiple is greatly compressed compared to the current value, there is still room for market capitalization to rise from 2025. However, based on the current stock price, the base scenario is not enough to support its $31.1 billion valuation, suggesting that without significant outperformance of company performance beyond benchmark expectations, the stock price may lack momentum in the short to medium term.

Optimistic Scenario:

Assuming stablecoins are widely adopted globally, with USDC as the "digital dollar" deeply penetrating various payment and financial scenarios; although U.S. interest rates have declined compared to 2025, they remain at a moderate level of around 3% from 2026 to 2028, Circle seizes the opportunity to significantly increase market share.

Key Assumptions:

- By 2028, USDC's circulating supply surges to around $300 billion (CAGR of approximately 40%);

- Circle's actual reserve yield averages about 2.5%;

- Coinbase's interest spread ratio is slightly renegotiated down to 40%, while economies of scale drive the net margin up to 20%.

Financial Impact:

- Circle's revenue is expected to reach around $7.5 billion by 2028;

- Net profit is estimated to be around $1.5 billion.

Valuation Analysis:

If the market is willing to give a high-growth company a P/E valuation of around 30× by 2028, Circle's market capitalization could reach approximately $45 billion. Currently, Circle's market cap is close to $30 billion, showing about a 50% increase from this optimistic valuation. This indicates that the current market pricing is roughly between the baseline and optimistic scenarios. If the optimistic scenario materializes, buying at the current price is not exactly a "bargain," but holding long-term should not result in a loss; moreover, the surge in Circle's earnings from 2025 to 2028 will quickly absorb the high valuation, and by 2028, Circle's P/E will return to a reasonable level of around 30×. In other words, buying and holding in an optimistic scenario can potentially yield a decent mid-to-long-term return for investors.

Scenario Analysis Summary:

Circle's long-term valuation is highly sensitive to key assumptions. The current market cap is only reasonable under assumptions close to the optimistic scenario; if measured against baseline or pessimistic scenarios, the valuation is significantly overstated. Investors need to carefully assess their confidence in the stablecoin market growth and Circle's competitive position. If they believe the market will expand rapidly and Circle will continue to lead, the high valuation is likely to be gradually rationalized through performance growth; conversely, if growth falls short of expectations, the stock price may face pressure to adjust valuation.

Conclusion:

Circle's current valuation level is significantly higher than comparable companies. Compared to Coinbase, Circle has a smaller profit scale but a higher revenue multiple; compared to payment giants like Visa and Mastercard, its business model has not been long-term validated, but its market-to-sales ratio is already close. This valuation gap is mainly due to the market's optimistic expectations for Circle's future development.

We believe that Circle's current valuation is in the overvalued range and will need to rely on high-speed performance growth over the next few years to gradually absorb this. Investors should closely monitor whether actual revenue and profits can meet expectations. If performance meets or exceeds optimistic assumptions, the high valuation is likely to be justified; otherwise, there may be a risk of valuation correction.

In summary, only when investors firmly believe that the stablecoin ecosystem will experience explosive growth and that Circle can continue to expand its business footprint does the current valuation have medium-to-long-term rationality. Otherwise, one should be cautious of the downside risk brought about by the disconnection between valuation and fundamentals.

10 Investment Advice and Conclusion

Combining the above analysis, we can draw a comprehensive assessment of Circle's valuation and investment:

- Scarce Asset in the Stablecoin Industry:

The stablecoin industry where Circle operates is currently experiencing rapid growth. The gradual clarification of the US regulatory framework further strengthens the long-term certainty of the industry, attracting major players to accelerate their presence. Despite intensifying competition putting pressure on Circle, it also confirms the market's recognition of the long-term value of stablecoins. Circle currently holds the second-largest market share in the stablecoin market and is the only publicly listed entity available for investment, making this scarcity a key consideration factor for investors' decisions.

- Valuation Implies High Growth Expectations:

From various valuation indicators, Circle's current valuation level is relatively high, reflecting that the market has already priced in its growth prospects to a considerable extent, with some valuation logic even referring to its future status as a financial infrastructure leader. The future stock price trend will heavily depend on whether the company's actual performance matches or exceeds market expectations. If quarterly financial performance or key operational metrics fall short of optimistic expectations, it could trigger a valuation correction.

- Mid-term Financial Performance Under Pressure:

Circle's financial performance mainly depends on three key drivers: the expected increase in USDC supply following industry expansion and operational optimization, but with short-term US Treasury rates entering a downward cycle, coupled with continued high distribution and transaction costs, its revenue and profit margins are expected to face pressure for a period of time.

- Massive Unlocking in November-December:

Shares from early investors will be unlocked in a concentrated manner in November-December, with the vast majority of the investment period nearing or exceeding a decade, resulting in strong exit demands. This event could exert significant downward pressure on Circle's stock price.

Future Catalysts: In the short to medium term, several potential catalysts could impact Circle's valuation:

1. Obtaining a Banking License – If Circle receives OCC approval for a national trust charter, becoming the first stablecoin bank in the US, its position and credibility will significantly increase, possibly triggering a revaluation.

2. Progress in Business Diversification – If Circle announces new revenue streams (such as launching a payment processing fee scheme) beyond market expectations, it will improve the impression of rate dependency and boost valuation.

3. Mergers and Partnerships – Any deepened cooperation with large banks/tech companies or potential acquisition (e.g., being acquired by a larger financial institution) will impact the market's assessment of its ultimate value.

4. Conversely, negative catalysts such as a sudden interest rate cut by the Federal Reserve, competitors launching stablecoins, security incidents, etc., will suppress valuation.

Investment Recommendation:

Based on the above, our stance on Circle's stock tends to be "Neutral." The reason is: despite Circle's bright long-term prospects, the current price has fully or even overly reflected optimistic expectations, with a low valuation safety margin. Considering the remaining macro and industry uncertainties, short-term volatility risks are high.

Long-Term Outlook:

If we extend the time horizon to 2030 and beyond, Circle has the potential to grow into an incredibly influential global fintech giant. By then, Circle may not only issue USDC but may also have banking functions, operate a multi-currency stablecoin network, expand revenue sources from interest to payment fees, financial intermediary services, and other diverse areas. Both profit scale and stability will see substantial growth. At that time, the seemingly excessive valuation multiples of today may be absorbed by rapid growth. Circle may become a robust and highly profitable payment company, similar to Visa and PayPal, but running on top of blockchain. To realize this blueprint, the company needs to excellently overcome various hurdles in policy and competition.

In conclusion, Circle represents the trend of integrating crypto finance with traditional finance, and its investment value depends on investors' assessment of the speed and depth of this trend's evolution.

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