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

Original Article Author: Lawrence Lee

Original Article Source: MintVentures

1. Research Summary

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

Scarcity Target in the Stablecoin Industry: The stablecoin industry where Circle operates 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 giants to accelerate their layout. Although intensified competition has put 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 publicly listed entity available for investment, making its scarcity a key consideration factor in investor decisions.

Valuation Already 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 referencing its future position as a leader in 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 indicators fall short of optimistic expectations, it may trigger a valuation correction.

Medium-Term Financial Performance Under Pressure: Circle's financial performance mainly depends on three key drivers: USDC supply is expected to continue growing with industry expansion and company operational optimization, but in the short term, the decline in U.S. Treasury yields, coupled with high distribution and transaction costs, is expected to keep its revenue and profit margins under pressure for a period of time.

November-December Faces a Large Unlocking: Shares from early investors will be unlocked in November-December, with the majority of investments approaching or exceeding a ten-year term, showing strong exit demands. This event may exert significant pressure on Circle's stock price.

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

- Obtaining a Banking License – If Circle obtains OCC approval for a trust charter, it will become the first stablecoin bank in the U.S., greatly enhancing its status and trustworthiness, possibly triggering a revaluation.

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

- Mergers and Partnerships – Any deepened cooperation with large banks/tech companies or potential mergers (e.g., being acquired by a larger financial institution) will affect the market's judgment of its end-state value.

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

Investment Advice:

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 exceeds optimistic expectations, with a low valuation safety margin. Considering the remaining macro and industry uncertainties, there is a higher short-term risk of volatility.

PS: This article represents the author's interim thinking as of the publication date, which may change in the future. The viewpoints are highly subjective and may contain errors in facts, data, or reasoning logic. All views in this article are not investment advice, and criticism and further discussion from peers and readers are welcome.

2. Business and Product Line

Circle Internet Financial, founded in 2013 by Jeremy Allaire and Sean Neville, with a mission to "enhance global economic prosperity through frictionless value exchange." The company initially focused on the cryptocurrency payment sector from its inception but faced challenges during its development. Along the way, Circle actively explored other business directions, including establishing the cryptocurrency market-making platform Circle Trade, acquiring the cryptocurrency exchange Poloniex, and acquiring the crowdfunding platform SeedInvest, among others.

In 2018, Circle, in collaboration with Coinbase, jointly established the Centre Consortium and launched the USD Coin (USDC), a compliant, transparent digital dollar stablecoin. USDC quickly grew to become 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 efforts on stablecoins and their related businesses.

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

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 worth of reserve assets in a bank custody account or compliance fund for every USDC issued, ensuring a 1:1 peg to the dollar.

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

Composition of Reserve Assets

Circle enforces a strict reserve management policy, investing reserve assets only in cash and U.S. government bonds with a maturity of no more than 3 months to ensure "security, high liquidity, transparency." As of the latest disclosure on July 31, 2025, around 85% of the USDC reserves are in the U.S. Dollar Money Market Fund (mainly U.S. Treasury Bonds), and 15% are in deposits at Global Systemically Important Banks (GSIBs). This means that the majority of reserve assets are highly liquid and can accommodate 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, thus enhancing the professionalism and transparency of reserve operations. The remaining cash reserves are diversified among various Global Systemically Important Banks (such as The Bank of New York Mellon, JPMorgan Chase, etc.) to support daily redemption liquidity and payment system integration.

Reserve Transparency and Auditing

Circle views transparency as the cornerstone of the USDC trust framework. Since issuance in 2018, the company has engaged an independent auditing firm monthly to produce reserve attestation reports, disclosing USDC circulating supply and corresponding reserve asset details. Currently, auditing services are provided by Deloitte. The audit reports consistently show 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 had faced regulatory penalties due to opaque reserves, Circle's self-regulatory and transparent strategy has won the trust of 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 financial report. As the company progresses towards going public, Circle will submit financial and operational data to the SEC on a quarterly basis, 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 same management model as USDC, with reserve assets in Euro cash and short-term European government bonds. Despite its current relatively small market capitalization (around 200 million euros), with the enforcement of the EU's Markets in Crypto-Assets Regulation (MiCA) and the Eurozone's shifting attitude towards digital finance, EURC has significant growth potential.

Circle has stated 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 in the UAE and will offer payment services, including stablecoins, hinting at 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 space.

2.2 Payment Settlement and Corporate Treasury Services

Circle Corporate Accounts

Circle provides comprehensive Circle Account services to corporate and financial institution clients. Through a single account, clients can achieve two-way exchange, sending and receiving of fiat and digital currencies such as USDC. Taking cross-border e-commerce as an example: a company can top up USD into the Circle account and instantly convert it to USDC, directly pay overseas suppliers in USDC; suppliers can also convert USDC to local fiat at any time. The entire process takes only a few minutes, significantly improving efficiency compared to traditional SWIFT transfers.

Circle accounts support various fiat deposit and withdrawal channels, including ACH, SWIFT, wire transfers, and SEPA, leveraging integrations with global banks and payment networks for wide coverage. In terms of blockchain payments, the account supports multi-chain USDC receiving addresses, allowing clients to choose a network (such as the Ethereum mainnet or Solana chain) based on cost and speed requirements. Additionally, Circle accounts offer multi-user permission management, transaction record export, 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 own platforms. Through API calls, merchants can accept customer payments and instantly convert them to USDC. For example, when 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 high cross-border settlement fees and exchange rate risks, while maintaining a seamless and transparent user payment experience.

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

Treasury and Exchange Services

Circle provides key treasury infrastructure for digital asset exchanges and brokers. Traditional banking channels often face issues such as slow speeds and complex compliance. After integrating with Circle accounts, exchanges can quickly convert users' deposited dollars to USDC for near real-time on-chain transactions; withdrawals can be processed through USDC for cross-chain transfers and local exchange, significantly improving efficiency and user experience.

Currently, several trading platforms, including Coinbase, widely use USDC as a substitute for the US Dollar. Although the trading volume of USDC on centralized platforms is still lower than that of USDT, it holds about a third of the market share on major exchanges like Binance. Through large-scale OTC minting services, Circle supports exchanges and institutions in efficiently completing bulk USDC purchases and redemptions, especially aiding in stabilizing liquidity during market volatility.

Furthermore, Circle's API also supports large-scale OTC trading and settlement, such as institutions settling loans and securities trades using USDC, to avoid delays in bank cross-border settlements. Overall, Circle's payment and treasury services directly serve end-user scenarios such as e-commerce and remittances, while also providing underlying financial infrastructure support for exchanges and institutions. This enterprise-focused model broadens the USDC's application ecosystem, enhances business stickiness, and strengthens 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 for blockchain functionality integration. The Wallets API enables businesses to quickly create and manage digital asset wallets without having to handle private key management and on-chain interactions themselves. Developers can generate USDC wallet addresses for users, check balances, and initiate transfers through API calls, with secure key custody and signing handled uniformly by Circle's backend.

Such services are particularly suitable for traditional enterprises looking to incorporate 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, facilitating interactions 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, enhancing secure custody of large digital assets for customers. These initiatives aim to establish Circle as the "AWS of the blockchain space," driving traditional application integration into the stablecoin ecosystem through underlying cryptocurrency services. While current API service revenue may be relatively small, its strategic significance lies in expanding the scale and circulation of USDC applications, indirectly promoting 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 more than 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 going through centralized exchanges or third-party bridges.

CCTP achieves cross-chain transfers by "burning USDC on the original chain and minting an equivalent amount on the destination chain," and Circle-issued credentials ensure the process's security and trustworthiness. The protocol gained significant attention in 2023 as a crucial innovation to address cross-chain bridge security risks and facilitate efficient value transfers. CCTP not only strengthens Circle's management of USDC cross-chain liquidity but also enhances USDC's consistency in a multi-chain environment (maintaining the total supply while only transferring between chains), further solidifying Circle's core position in the stablecoin ecosystem.

2.4 Future Product Line Expansion

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

- Stablecoin Blockchain ARC: In August 2025, Circle announced the launch of ARC, an open L1 blockchain designed specifically for stablecoins. This chain uses USDC as the native Gas token, features a built-in 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 planned for 2026. ARC will become the core vehicle for Circle's future business, with multiple services built on this chain.

- Cross-Border Foreign Exchange: Following the launch of ARC, Circle can leverage USDC/EURC to develop cross-border foreign exchange services, enabling fast exchange between USD and EUR, offering better exchange rates and efficiency compared to traditional forex channels, thus entering 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 counterparties' addresses, building a "permissioned stablecoin" ecosystem, attracting 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 engage in USDC lending services on the institutional side, such as accepting collateral and lending USDC, earning interest income, similar to securities lending business. If regulations permit, Circle may relaunch institutional-focused fixed-income products (such as "Circle Yield"), expanding revenue streams 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 digital pound sterling pilot program planned by the UK, acting as a private distribution agency providing exchange and custody services. The company is also actively exploring partnerships with other CBDC teams worldwide to maintain its core position in the digital currency space.

In conclusion, Circle is evolving from a single stablecoin issuer to a comprehensive digital financial ecosystem covering "stablecoins + payments + developers + banking services." Through horizontal and vertical business expansions, Circle has not only opened up new growth opportunities but has also more deeply integrated into the digital economic infrastructure. With the synergistic effects of various business lines unleashed, Circle aims to build a digital financial network with USDC at its core, creating long-term value for its shareholders.

3. Management and Governance

3.1 Core Management Team

Co-founder and 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 space, is widely regarded as a figurehead in the stablecoin industry, frequently participates in U.S. congressional hearings and policy discussions, and actively advocates for industry-appropriate regulation.

Another co-founder, Sean Neville, served as President in the company's early days, 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 CFO Jeremy Fox-Geen, who joined Circle in 2021 after 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 preparations.

COO Elisabeth Carpenter and CLO Flavia Naves, also from traditional financial or tech giants, bring valuable operational and compliance management experience to the company. The legal team has played a key 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 during its rapid growth.

3.2 Board of Directors and Governance

In 2018, Circle and Coinbase jointly established the Centre Consortium, dedicated to USDC-related matters, with a 50%:50% ownership split. In 2023, Circle restructured its partnership with Coinbase, taking direct control of USDC affairs, with Coinbase relinquishing its original equity stake to hold a small stake in Circle instead, while retaining a 50% revenue share of USDC (see section 5.2 "Distribution and Transaction Costs" below for detailed explanation of the partnership). Therefore, 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, the Circle board of directors also includes industry veterans and strategic investor representatives. Jeremy Allaire serves as the Chairman of the Board, with director representation from funds such as Goldman Sachs, Excel, and Breyer to ensure that the company's strategy takes investor interests into account. Furthermore, Circle has brought in several independent directors, including individuals with extensive regulatory backgrounds like former FDIC Chair Heath Tarbert, to provide robust support for the company's 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, with enhanced voting rights. This mechanism ensures that founder Jeremy Allaire can maintain strategic direction even after the company goes public, avoiding short-term market pressures that may disrupt long-term development plans.

Prior to the IPO, the company had already 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), sanction compliance, equipped with a dedicated compliance team, and undergoes external audit evaluations annually.

Circle also has a clear reserve management policy and contingency plan. 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 de-pegging. The company's management promptly issued a transparent announcement, committing to use its own funds to cover the potential shortfall. Ultimately, with intervention from the Federal Reserve, the reserve assets were preserved, and USDC was able to re-peg. This incident highlighted the management's ability in crisis response and risk communication, as well as the timely and effective measures taken to prevent user panic.

3.4 Compliance and Regulatory Relations

Since its inception, Circle has consistently placed high importance on operating with compliance and has been hailed as a "model for embracing regulation." In 2015, Circle became the first holder of the BitLicense in New York State, which is considered one of the strictest state-level regulatory licenses in the digital currency industry, demonstrating the company's full cooperation with regulatory requirements.

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

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

In June 2025, after the U.S. Senate passed the Stablecoin Act, 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 based on cooperation, and the management is acutely aware that only by proactively embracing regulation can mainstream market acceptance be gained. 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 dip during the cryptocurrency market correction, the current total stablecoin market capitalization has surpassed $270 billion as the cryptocurrency market has rebounded. As of July 2025, the stablecoin supply accounts for over 1.2% of the U.S. M2 money supply (with the total U.S. M2 money supply being $22.12 trillion), indicating a significant scale.

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

Stablecoin Circulation Source: theblock

The demand for stablecoins mainly comes from the following aspects:

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 fully to stablecoins from BTC during the 2019-2021 cycle, with over 95% of spot trading volume now coming from trading pairs composed of cryptocurrencies and stablecoins. In recent years, stablecoin-based perpetual contracts have also seen rapid growth, 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 costs, and 24/7 availability, stablecoins have shown significant potential in international remittances and trade settlements. Traditional remittances rely on multiple intermediaries, taking several days and incurring high costs, whereas using stablecoins like USDC allows for near real-time peer-to-peer settlement. 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 field.

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 provisioning, and derivative protocols. Users can deposit stablecoins into DeFi platforms to earn interest or participate in liquidity mining, giving them a quasi-deposit function. During the 2021 DeFi boom, there was a surge in on-chain borrowing demand for USDC, prompting 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 services have shifted towards a more cautious approach.

4. Macro Environmental Impact

Geopolitical and global financial trends also drive the development of stablecoins. Despite the growing 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 instead of their local currencies, inadvertently strengthening the actual influence of the US dollar. According to ARK Invest analysis, the total amount of U.S. Treasury securities held by stablecoins has surpassed countries like Germany and South Korea. Stablecoins are becoming important new buyers of U.S. Treasury bonds and a new vehicle for the internationalization of the U.S. dollar, to some extent solidifying the U.S. dollar's reserve currency status. Particularly in emerging markets, high inflation and capital controls have prompted residents to view stablecoins as a substitute for the dollar, for use in daily payments and value storage. For example, in Argentina, Nigeria, and other places, USDT and USDC are widely used, forming a "parallel currency network" to compensate for deficiencies in the local financial system.

Monthly Stablecoin Trading Volume Source: Grayscale

Additionally, worth mentioning is the Agentic Payments Protocol 2 (AP2) jointly launched by Google and Coinbase on September 17th. AP2 aims to securely initiate and process AI agent-driven payments across platforms, with stablecoins being introduced as the primary means of payment. This initiative is also expected to accelerate the circulation of stablecoins in the short term. Furthermore, the characteristic of stablecoins being blockchain-based rather than tied to human biometrics naturally makes them more suitable for economic activities between AI agents than other payment systems. In the future, economic activities between AI agents may also drive further expansion of the stablecoin market.

4.2 Competitive Landscape

The former stablecoin market presents a competitive landscape of "two giants and many strong players": Tether (USDT) and Circle (USDC) rank first and second, respectively. Based on the current issuance scale, USDT holds a market share of approximately 58%, while USDC accounts for around 25%. USDT, issued by the offshore company Tether, maintains its leading position through first-mover advantage and deep integration with multiple exchanges. However, its operational transparency and compliance have long been questioned, with insufficient reserve disclosures and audits becoming a focal point of scrutiny for European and American regulatory bodies.

On the other hand, the USDC issued by Circle is known for its compliance and transparency, holding various state money transmission licenses in the US and licenses such as the New York BitLicense. Circle proactively conducts monthly audits, with the reserve assets consisting of 100% cash and short-term US Treasury bonds, the majority of which are held in US-regulated funds. This robust 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 US, EU), while USDT may face constraints in certain jurisdictions (such as those restricted by the EU's MiCA regulation).

Other key competitors include:

Payment Giants: PayPal introduced the USD stablecoin PYUSD in 2023, leveraging its large user and merchant network to promote stablecoin payments. Currently, the circulating supply of PYUSD is 1.17 billion tokens, which is still much smaller than USDC, but PayPal's brand and channel 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 of France launched the Euro stablecoin. With stablecoin legislation successfully passed, more banks are expected to participate in the competition with their own credit-backed stablecoins. However, their applications may be more focused on enterprise payments and on-chain settlements 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 USDS+DAI are currently the third and fourth largest stablecoins by issuance volume (with 13 billion and 9.5 billion tokens issued, respectively). USDE introduces cryptocurrency perpetual contract fee arbitrage into the stablecoin system, allowing its stablecoin yield to surpass that of short-term Treasuries, demonstrating innovation and product-market fit. However, in absolute scale and application scenarios, these types of stablecoins still have a relatively small scale and impact. They are primarily viewed by users as yield instruments and do not pose a significant threat to USDC in the short term.

Other Compliant Issuers: Including USDP issued by Paxos and BUSD, which was launched by Binance but halted in 2023 due to regulatory pressure. While institutions like Paxos hold US trust licenses and have a high level of compliance, their market promotion and ecosystem development lag behind Circle. Since 2025, compliant stablecoin projects have rapidly emerged, such as WLFI's USD1 with the Trump family's involvement (with a circulation of over $25 billion), Plasma project governance token XPL with a pre-market cap exceeding $7 billion, Ethena's fiat-backed stablecoin USDTB (with circulation exceeding $1.6 billion), and more small to medium-sized projects continue to enter the market.

In conclusion, leveraging USDC, Circle has established a certain first-mover advantage based on its compliance capabilities 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 a prevailing trend. The 2022 Terra stablecoin event triggered global regulatory alertness, leading various countries to discuss regulatory frameworks.

In July 2025, the U.S. Congress passed the "Guiding and Establishing the United States Dollar Stablecoin National Innovation in Unlocking Opportunities and Support" (GENIUS Act). This bill established a federal regulatory framework for payment-based stablecoins, which:

Requires a 1:1 reserve backing for stablecoins, limited to holding 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 arbitrarily reallocated or rehypothecated; Requires stablecoin issuers to establish sufficient capital and liquidity buffers, robust risk management, matching business scale and risk conditions. Prohibits direct interest or income payments to holders to avoid the stablecoin being considered a deposit or security. Clearly excludes direct regulatory authority over payment-based stablecoins from securities and commodity regulatory agencies like the SEC and CFTC, placing regulatory responsibility with banking regulators (Federal Reserve, OCC, FDIC, etc.) and state financial regulatory bodies.

Overall, the GENIUS Act establishes the compliance baseline for federal-level stablecoins in the United States, with clear provisions on issuer qualifications, reserve asset transparency, and redemption obligations. The GENIUS Act will come into effect 18 months after enactment (by the end of 2026), following which unapproved entities will not be able to issue payment-based stablecoins in the U.S.

It is foreseeable that the GENIUS Act will eliminate poorly qualified issuers, promoting industry consolidation. For Circle, given its adherence to high-standard compliance (holding licenses in 46 states, New York BitLicense, licenses in Bermuda, the UK, etc.), the new federal licensing threshold will further highlight its legal and compliance advantages, potentially 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 money tokens) under unified regulation, requiring licensing, 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 European market expansion. In Asia, international financial centers such as Singapore and Hong Kong are also developing stablecoin licensing regimes. The Hong Kong Monetary Authority published guidelines at the end of 2023 to regulate stablecoin issuance and require a 1:1 reserve for a Hong Kong dollar stablecoin. Japan has allowed stablecoin issuance regulated by trust companies. Overall, major jurisdictions are actively introducing stablecoin regulations, aiming to ensure financial stability and attract related businesses to operate locally. This policy competition benefits leading enterprises in compliance operations. With its multi-jurisdiction licensing layout (such as the UK FCA Electronic Money License, Bermuda DABA Digital Asset Business License, etc.), Circle has the ability to rapidly enter various compliant markets and seize opportunities in international expansion.

4.4 Industry Trends Outlook

In the coming years, the stablecoin industry has several key development trends worth noting:

Rapid Market Growth: Ark Invest predicts that by 2030, stablecoins could account for 0.9% of global M2, with a market size exceeding $1.4 trillion.

Despite JPMorgan's conservative stance, projecting a market cap of $500 billion by 2028, most institutions are more optimistic, believing that stablecoins are still in the early stages of adoption and could see 5–10x growth in the next five years. Especially as regulatory frameworks become clearer, traditional financial institutions and financial markets may widely adopt stablecoins for settlement and liquidity management, such as conducting securities settlement pilots, replacing government bond market settlement, and other applications. Standard Chartered 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 around 6% used for real-world payments and settlements. With payment companies like PayPal joining, integration with networks like Visa, and clear legislation defining their status as payment tools, the share of payment settlements is expected to gradually increase. Grayscale's research report coins 2025 as the "Summer of Stablecoins," noting that large U.S. companies (such as Amazon and Walmart) are also exploring stablecoin applications. In the future, stablecoins may be embedded in e-commerce payments, supply chain finance, gaming, and entertainment, enabling large-scale commercial payment applications.

Deep Integration with Traditional Finance: Stablecoins are gaining more recognition from traditional financial institutions: giants like JPMorgan and Bank of America are involved in related investments or pilots; trading infrastructure provider DTCC is exploring using stablecoins to improve settlement efficiency; U.S. mortgage institutions are even considering including digital assets in borrowers' net assets. Stablecoins may become tools for bank liquidity management and cash management in the future, with some banks potentially holding USDC directly as reserve assets. U.S. Treasury officials have also noted the role of stablecoins in buying U.S. bonds, hinting that policymakers may gradually accept and support stablecoins as a "private-sector supplement" to the U.S. financial system. It can be foreseen that stablecoin issuers may be integrated into payment systems in the future (such as accessing the U.S. Fed's FedNow real-time payment network), enabling seamless interoperability between traditional banks and on-chain digital dollars.

Technological Evolution and Multi-Chain Strategy: Stablecoins will expand to more high-performance public chains and layer 2 networks to meet different scenario requirements. USDC is currently issued on over 10 blockchains (including Ethereum, Solana, Tron, Algorand, Arbitrum, etc.). In 2025, new Ethereum Layer 2 and cross-chain protocols are developing rapidly, and Circle has introduced the Cross-Chain Transfer Protocol (CCTP) to facilitate USDC circulation across different chains. Looking ahead, Circle may issue more currency-backed stablecoins (such as Asia-Pacific currencies) or support central bank digital currencies (CBDCs) issued by central banks to interface with 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 phase of regulatory compliance and competition. With its leading market share and regulatory advantages, Circle is well positioned in this process. However, the industry is changing rapidly, and the company needs to continue innovating and operating 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 surge in supply during the 2020 DeFi boom and the 2021 bull market. 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 bear phase in 2022, the circulation of USDC continued to grow to nearly $50 billion.

However, in March 2023, following the bankruptcy of the crypto-friendly banks Silvergate and Signature, USDC faced a liquidity crisis, with redemption demands sharply increasing and a brief period of depegging. Although the Circle team responded promptly and successfully completed all redemptions, the event caused the circulating supply of USDC to plummet rapidly from 43 billion to 30 billion 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 circulation of USDC continued to hit new highs, surpassing 72 billion by the current date.

On the user side, the total on-chain addresses exceeded 8.5 million in 2022, with over 1.1 million monthly active addresses. By 2025, the daily active addresses reached approximately 280,000, and the annual transaction volume grew by 118%. The on-chain transaction volume also significantly expanded: as of mid-2025, the total on-chain transaction volume of USDC in the past 12 months reached around $17.5 trillion, mainly from major exchange transfers and DeFi protocols. These data indicate that USDC has become one of the widely used stablecoins in the blockchain ecosystem, with a solid user and ecosystem foundation.

Balance Sheet and Cash Flow

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

Excluding reserve assets, the company's proprietary assets mainly consist of funds raised and retained earnings from previous years. After raising $1.05 billion in funding through an IPO in 2025, according to the Q2 report, the company currently holds cash reserves exceeding $1.1 billion. Additionally, on August 15, Circle also conducted a $455 million equity issuance of 3.5 million new shares at a price of $130 per share, further bolstering the company's cash position. Circle has no interest-bearing long-term debt, and its business model requires little to no leveraged financing (reserve assets belong to users and are not considered company debt).

In terms of operating cash flow, influenced by the nature of its USDC business, Circle's day-to-day operational cash flow mainly comes from interest income, indicating a very healthy financial state. In 2024, the operating cash flow exceeded $1 billion, significantly higher than capital expenditures and dividend payments (Circle has not declared dividends yet and retains all profits). Consequently, the company's financial structure is robust, with ample 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) playing a predominant role.

Circle's business model essentially involves earning income from the interest rate spread between "user deposit costs" and "reserve investment income," similar to banks, making it highly sensitive to interest rate fluctuations.

During the period of zero interest rate policy by the Federal Reserve in 2020, Circle's total revenue was only $15.4 million, mainly derived from miscellaneous fees like 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 substantial increase in revenue to $84.9 million that year. In 2022, with interest rates rapidly rising (year-end federal funds rate reaching 4.5%) and the USDC circulating supply doubling, the company's annual revenue surged to $772 million.

In 2023, as the Federal Reserve raised rates to above 5% and maintained them at a high level, Circle's full-year revenue further doubled to around $1.43 billion. In 2024, the annual revenue reached $1.676 billion, a year-on-year growth of 15.6%, showing a slowdown in growth. In the first quarter of 2025, the company achieved revenue of approximately $579 million, setting a new historical high. If this pace continues throughout the year, the full-year 2025 revenue is expected to exceed $2.3 billion, demonstrating strong profit potential in a high-interest rate environment.

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

The table below summarizes Circle's key performance data for the years 2020-2024 (all amounts 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 US Treasury bond interest rate levels, and distribution and transaction cost as a percentage.

5.2.1 USDC Supply

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

(1) Overall health of the stablecoin market:

The stablecoin market is thriving, and as the current second-ranked stablecoin, USDC's supply naturally increases. The primary driver of the stablecoin market is still the cryptocurrency bull-bear cycle. During a bull market cycle, cryptocurrency trading and DeFi activities are active, stablecoin demand rises, 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 significant advantage relative to other stablecoins, it will increase USDC's proportion of the total stablecoin supply, 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 application in traditional financial scenarios, USDC's supply scale as a percentage of the total stablecoin supply is expected to further increase.

USDC Supply Trend Source: theblock

Currently, the overall crypto market is in an upward trend from 2023 to 2025, providing continued growth momentum for stablecoins like USDC; demand from areas such as payments continues to grow, and the overall health of the stablecoin market is expected to further improve. With the gradual clarification of regulatory policies, USDC's competitiveness has increased relative to its main competitor USDT. Additionally, USDC has recently started frequent collaborations with centralized exchanges, enhancing its competitiveness through operations (providing interest to exchanges, indirectly returning part of the reserve interest to users), and both factors will drive an increase in USDC's 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 Federal Reserve's aggressive rate hikes in 2022–2023, raising the rate to 5.25%, drove Circle's effective average yield in 2024 (net of some non-interest-bearing cash) to 2.68%. Excluding Coinbase's split, this yield corresponds to an overall return on reserve assets of about 5%, closely aligned with the concurrent 3-month U.S. Treasury bill rate.

USD SOFR Trend (Secured Overnight Financing Rate)

By comparing the USDC supply, short-term rate levels, and Circle's income, we can see that compared to changes in USDC supply, changes in rates are more pronounced. Therefore, rate fluctuations have a more significant impact on Circle's operating income. For example, the full-year USDC supply in 2023 is significantly lower than in 2022, but Circle's revenue doubles from 2022 due to the rapid rate increase. The USDC supply in 2024 is higher than in 2023, but as rates begin to decline, Circle's revenue only increases by 15% compared to 2023.

Looking ahead, there is some uncertainty in the rate trend, but the market generally expects an interest rate cut cycle. According to an ARK report, if the Federal Reserve cuts rates by 2 percentage points to around 3% starting in 2025, Circle's annual interest income may decrease by about $631 million (based on 2024 data), and net profit would shift from a profit of $156 million to a loss of $475 million. This indicates that a rate decline significantly affects Circle's profitability. Conversely, if rates remain high or even increase further, Circle's profits will rapidly expand.

There is a widespread expectation that the Federal Reserve will gradually reduce rates to a neutral level (around 2–3%) in 2025–2026, implying 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 primary direct cost items. In 2024, this expenditure amounted to $1.01 billion, representing 60% of the company's total revenue. Of this, 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 paid 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 complex partnership. The current partnership agreement is valid from August 2023 to August 2026, with uncertainties regarding renewal or adjustments upon expiry. The revenue share mechanism can be summarized as follows: Coinbase first receives a proportionate share of the net income based on the USDC it holds in custody, followed by receiving 50% of the remaining net income. Specific terms include:

1. Firstly, determine the payment base, which is based on the daily income generated by the reserve 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 revenue (annualized approximately between 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 the reserve, such as accounting, finance, regulatory, and compliance.

3. Coinbase receives a proportionate share of the payment base net income daily based on the proportion of USDC held in its custody or managed wallets. For example, if Coinbase custodies 20% of the USDC, they will first receive 20% of the payment base.

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

Actual Revenue Share Situation:

- In 2022–2024, Coinbase's weighted average USDC custody ratios 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 revenues were $7.359 billion, $14.306 billion, and $16.611 billion, with Coinbase's share percentage being 33.7%, 48.32%, and 54.65%, respectively.

The first quarter and semi-annual data for 2025 show 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, a slight 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%, with its revenue share of Circle's reserve revenue expected to remain between 50% and 53%.

Partnership with Other Exchanges

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

The incentive payments are 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 overall reserve rate), reset each quarter at a discount below SOFR. The incentive rate increases as Binance's USDC holdings increase, ranging from the "low double-digit percentage to high double-digit percentage" of the base rate.

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

- If Binance holds 3 billion USDC (the agreed level), the incentive rate is approximately 50% of the base rate (low double-digit percentage), with an annualized incentive rate of 2.5%. Circle would need to pay Binance around $75 million per year.

- If the holdings increase to 4.8 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 per year.

The agreement stipulates that Binance must hold at least 1.5 billion USDC, typically more than 3 billion USDC. In summary, under this partnership arrangement, Binance can also receive a share of the USDC reserve interest based on the proportion of its USDC holdings to the total USDC circulation, but unlike Coinbase, Binance cannot receive the full reserve interest and can only receive the "low 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, well above 3 billion USDC, and is expected to receive a share based on the "high double-digit percentage." 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 key way for Circle to expand the circulation of USDC by incentivizing partners to hold and promote USDC through sharing part of the reserve interest. Currently, this strategy has been effective but has also resulted in a significant diversion of Circle's interest income.

From a shareholder perspective, Circle could retain all interest income from USDC, mainly from the portion held by on-chain decentralized exchanges. The circulation share of this type of USDC more 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 "favorite USDC holder" among Circle shareholders. However, Hyperliquid has recently begun openly soliciting teams to develop its proprietary stablecoin USDH, which could significantly impact the amount of USDC held.

In summary, Circle's distribution and transaction costs may further rise in the future. We estimate that by 2025, this cost as a percentage of the reserve revenue will reach 60%–63% (with this ratio being 38.99% for 2022, 50.31% for 2023, 60.85% for 2024, and 60.08% for Q1 2025). This will continue to squeeze Circle's profit margin, putting pressure on the company's overall profitability.

On-Chain Transaction Costs

On-chain transaction costs mainly include Gas fees, custody fees Circle incurs to support USDC's operation in a multi-chain environment, and fees paid to the underlying blockchain protocols. Although this cost is relatively small compared to the large interest spread (usually a few percentage points of revenue), the specific amount is influenced by the congestion of the blockchain network and exhibits some volatility. For example, during network congestion on the Ethereum mainnet, large-scale minting and burning operations of USDC incur higher Gas fees.

To address such expenditures, Circle holds approximately $31 million of crypto assets on its balance sheet specifically to cover on-chain transaction costs. Looking ahead, with the gradual rollout and adoption of Circle's proprietary blockchain ARC, the efficiency of on-chain transactions 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 the 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 accounted for as a transaction cost in the financials, essentially eroding part of the stablecoin asset's yield, representing about 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 (based on asset size) as a proportion of revenue may increase, as the fee is based on managed assets, while interest income is directly proportional to the interest rate.

Overall, considering that Circle's distribution and transaction costs as a percentage of revenue are expected to slowly increase from 60% in 2024 to remain in the 60% to 63% range by 2028 if the sharing rules of the Circle and Coinbase partnership remain unchanged after the 2026 renewal. There is some uncertainty in this ratio: if the cost rate may remain high by continuing to incentivize circulation through partnerships with centralized exchanges, but increasing the proportion of direct users could help reduce costs.

Every one-percentage-point change in the distribution cost rate will have a significant impact on Circle's overall profitability. Therefore, the company needs to carefully balance ecosystem expansion and profit balance, actively achieve long-term cost control through technological upgrades (such as the ARC chain), and optimize partnership structures.

5.2.4 Summary and Outlook

Among the three core drivers affecting Circle's financial performance—USDC supply, US short-term interest rate level, and distribution and transaction costs—we believe that only the USDC supply is likely to show positive growth in the future.

The decrease in the US dollar short-term interest rate will directly result in a reduction in Circle's interest income. In an extreme scenario, if the Federal Reserve reintroduces the zero interest rate policy of 2020–2022 in the future, Circle's revenue based on the current business model will significantly shrink, forcing the company to seek other sources of income for sustainable operation.

Furthermore, under the current promotion strategy centered around exchange partnerships, the 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 summary, 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 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 expense and investment gains and losses have a limited impact on the company's profit. However, it is worth noting the strategic investments and cryptocurrency assets held by the company. For example, Circle has held a certain amount of Bitcoin, Ethereum, and other digital assets as part of its liquidity reserves or long-term investments, and has invested in several blockchain startups. The fluctuation in the fair value of these assets may result in gains or impairments on the books. During a significant downturn in the crypto market in 2022, Circle recognized tens of millions of dollars in impairment losses on digital assets, leading to a negative other comprehensive income for that year. It should be noted that such gains or losses mainly belong to non-operational items. 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.

Furthermore, as Circle progresses in its application for a banking license, if ultimately approved, the company may need to meet certain capital requirements and set up corresponding reserves, which could 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 place some reserves under bank on-balance-sheet management. The specific policy implications are still pending clarification, and are currently not included in financial forecasting considerations.

6. Competitive Advantage and Moat

As one of the pioneers in the global stablecoin space, Circle's ability to excel in competition and successfully go public is thanks in part to its unique competitive advantages and built moat. This is reflected in the following aspects:

Compliance and Trust Advantage:

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

Currently, Circle has obtained money transmitter licenses from the majority of U.S. states, the New York BitLicense, as well as relevant licenses in jurisdictions such as the UK and the EU, becoming one of the few globally compliantly licensed crypto companies. The company has also applied for a U.S. national trust bank charter, and if approved, will be subject to regulatory oversight similar to traditional banks. This series of compliance actions has cleared the way for expanding its institutional client base (such as banks, publicly traded companies, etc.)—these institutions are more likely to choose USDC, which is compliant, transparent, and regulated, rather than stablecoins issued by overseas entities with lower regulatory transparency.

It can be foreseen that with the clarification of the stablecoin regulatory framework 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 efforts and a good reputation. Trust itself is a form of "currency," and with its leading position in trust, Circle 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 detachment 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 stablecoins themselves follow a simple 1:1 pegging mechanism, the surrounding technical infrastructure and service ecosystem play a significant role as a competitive barrier. 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 Cross-Chain Transfer Protocol (CCTP) achieves intermediary-free USDC cross-chain transfers through an atomic burn/mint mechanism. The protocol's technical implementation is challenging, but Circle has not only successfully implemented it but has also open-sourced it, allowing USDC to maintain uniformity and liquidity in a multi-chain environment while strengthening the industry 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, reflecting the team's deep integration and profound understanding of financial services and blockchain technology. Competitors looking to provide an equivalent 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" enables Circle to win over enterprise clients as a solution provider—not just a token issuer—and build an invisible moat of products and technology.

Brand and Market Recognition:

Through years of trustworthy operations and ongoing market education, Circle has established strong brand awareness and reputation assets in the industry. USDC has almost become synonymous with a "secure, transparent stablecoin," especially with wide acceptance in the US and European markets. When enterprise users choose a fund processing tool, they tend to prefer 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 in its ecosystem, reflecting that even competitors have to acknowledge USDC's market position. Additionally, Circle has received public recognition from top investment institutions, including BlackRock and ARK, further cementing market confidence. This kind of brand value cannot be quickly gained through short-term subsidies or capital injections 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 decision-making.

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. Meanwhile, Circle's current market position allows it to enjoy this network effect to a certain extent.

On one hand, USDC has gained support from almost all major cryptocurrency exchanges, wallet services, and DeFi protocols, becoming a foundational liquidity component in the crypto ecosystem. When developers issue tokens or launch new projects (especially on-chain projects), they often prioritize integrating USDC, sometimes even over USDT, in order to leverage its wide user base, high liquidity, and compliance advantages. In this round of increased on-chain activity, stablecoins on Solana, Base, and Hyperliquid chains are mostly USDC (at 69.16%, 89.65%, and 95.15% respectively). This broad access itself acts as an industry barrier, requiring new stablecoins to invest significant time and resources to achieve a similar level of ecosystem penetration.

On the other hand, Circle has continuously expanded its partnership network through collaborations with internationally renowned institutions, creating a "flywheel effect." The company partners with Visa and Mastercard to promote stablecoin payment applications, collaborates with MoneyGram to enable offline exchanges, and teams up with The Bank of New York Mellon to provide asset custody services. These partners are typically large-scale with deep resources, and their support significantly expands the use cases for USDC. For example, as early as 2021, Visa piloted the use of USDC for cross-border credit card settlement, marking the first integration of a stablecoin into the traditional payment network. With more 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 forming a positive feedback loop.

Sustainability of the Moat:

Although the above advantages position Circle favorably in the current competition, its moat is not unassailable and requires ongoing investment from the company to maintain and expand:

- Regulatory advantage may gradually standardize: As the industry's regulatory framework matures and becomes more uniform, compliance may transition from a differentiating advantage to an industry entry barrier. Once competitors are equally fully compliant, Circle will need to maintain its lead through superior service and product experience.

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

- Ongoing Investment in Technological Advancement: Blockchain technology evolves rapidly, and Circle must stay ahead in performance, security, and new features; otherwise, it may be surpassed by more agile competitors.

- Long-Term Maintenance of Brand Reputation: The company must firmly 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 coming years. If it can successfully leverage its compliance advantage to expand into the traditional financial sector, its moat will further widen, achieving the "the rich get richer" Matthew effect. However, strategic mistakes or poor management could weaken its current advantages. Therefore, Circle needs to continuously strengthen its compliance efforts, deepen partnerships, maintain technological leadership, and uphold 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 up to 99% of total revenue in 2024. This concentration implies that once the U.S. enters a rate-cutting cycle, the company's revenue and profit will face a significant decline risk. The market broadly expects the Fed to start cutting rates in 2025-2026, and if so, Circle's profitability may see a sharp fall from its 2024 peak.

In the long term, if the global economy returns to a low-interest-rate environment (similar to the 2010s), Circle must explore non-interest income sources; otherwise, the sustainability of its business model will be challenged. Moreover, 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 declining profits, further exacerbating stock price volatility. To address this risk, Circle needs to actively expand non-interest business, optimize profit-sharing mechanisms, and set aside profit reserves during high-interest-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 Risks

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

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

- New Entrants: PayPal has already launched PYUSD and is steadily promoting it through 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 cases in the payment space. Emerging alternative solutions, such as innovative products like Ethena USDe, claiming full compliance and pegged to government bond yields, may attract user diversion if they offer higher returns.

- Central Bank Digital Currency (CBDC): If the U.S. or the EU introduces an official digital currency and promotes its usage through policy guidance, it could squeeze the market space for private stablecoins. Although the industry generally believes that CBDCs and stablecoins will coexist, caution is still needed regarding the structural impact of policy biases.

- Technological Disruption: Emerging technological solutions like decentralized stablecoins, if they break through the challenge of "achieving price stability without fiat reserves" (although the current difficulty level is extremely high), could pose a fundamental challenge to Circle's business model.

Facing the aforementioned competition, Circle needs to continuously strengthen its product experience, deepen customer relationships, provide differentiated enterprise services, actively monitor industry technological trends, and, if necessary, adjust its strategic direction, such as proactively participating in CBDC ecosystem collaboration, to maintain competitiveness in the evolving market.

3. Policy and Regulatory Risks

The uncertainty of the regulatory environment was previously a major risk for the entire stablecoin industry. However, after the successful legislation of the GENIUS Act in the U.S., this risk has been greatly reduced, but there are still uncertainties in the specific implementation of the law. Nonetheless, 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 U.S. government policy is relatively business-friendly, but if there is a change in ruling parties in the future (such as a possible Democratic government after 2028), the policy direction may shift towards enhanced regulatory scrutiny, and even the introduction of a central bank digital currency (CBDC) to squeeze the development space of private stablecoins. At the international level, some countries may implement restrictive policies on the use of USD stablecoins to maintain their currency's position or financial stability. Regulations limiting USDC usage by major economies like the EU, India, etc., 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 regulatory tightening would directly impact its business expansion and market confidence. Therefore, Circle needs to actively engage in policy dialogue, adjust its compliance strategy 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 if they occur:

- Reserve Asset Risk: While Circle allocates reserve assets to cash and short-term US Treasuries, in extreme scenarios (such as a US Treasury market liquidity crisis or sovereign debt default), it may still face challenges in asset liquidation or forced selling at a discount.

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

- Technology and Security Risk: This includes risks such as hacks, smart contract vulnerabilities, system failures, which could result in fund losses or USDC operational disruptions. While Circle has a good security track record, no system is entirely immune to risks, requiring continuous investment to ensure technological leadership and reliability.

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

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

5. Market Volatility and Macroeconomic Risk

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 collapse) could lead to a large-scale redemption of stablecoins by users, resulting in a contraction of USDC supply and a direct reduction in interest income. Conversely, a bull market will bring rapid scaling but also higher demands on operational management capabilities.

- Macroeconomic Changes: If the U.S. economy enters a recession, a decrease in investor risk appetite may reduce their allocation to crypto assets and stablecoins; additionally, an economic downturn usually comes with interest rate cuts, further squeezing Circle's interest income.

- USD Status Changes: Although stablecoins have expanded the U.S. dollar's international influence at this stage, if the trend of "de-dollarization" accelerates, it may have a long-term impact on the demand for USD-denominated stablecoins.

- Exchange Rate and Inflation Risks: A significant increase in the value of the U.S. dollar may raise the cost for overseas users to use USDC; high inflation, while pushing up interest rates, may also suppress 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, and more. 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. Once there is an issue with USDC's peg or reserve disclosure, it could quickly impact market confidence.

Risk Management Outlook

To address the above risks, Circle has taken various measures, including actively engaging in regulatory communications, 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 resistance through business diversification (such as issuing multi-currency stablecoins, expanding non-interest income), expanding into multiple regional markets, increasing technical investment and compliance, and governance construction. At the same time, adequate capital (from IPO and retained earnings) also provides an important buffer for the company to respond to potential shocks.

8. Stock Lock-up and Unlocking Situation

Circle was officially listed on June 5, 2025, with an initial total share capital of 227.6 million shares, a circulation rate of 17.2%, and the rest in a lock-up period. The specific situation of post-IPO shares is as follows:

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

excluding potential future issuances in undiluted situations (unallocated RSUs, option pool, etc. ≈ 25–30M).

Lock-up Period

Regarding the lock-up period, the original prospectus stipulates the following: "All locked-up shares may be sold 180 days after the date of this prospectus, or the second trading day after the company submits its 2025 third-quarter report to the SEC and publicly discloses its performance (whichever is earlier)."

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

Since the Q3 earnings release date for most US stocks is in mid-November, the most probable unlocking period for the restricted shares mentioned above is "the second trading day after the company submits the 2025 Q3 Form 10-Q to the SEC (or simultaneous press release/earnings call)," with the latest date being December 1st.

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

- T+1 = 11-14 (Friday)

- T+2 = 11-17 (Monday)

→ Unlocking effective: November 17, 2025

On August 15, 2025, Circle also conducted a public stock offering at $130 per share, with plans to issue 2 million new shares and existing shareholders to sell 8 million shares. Eventually, utilizing the overallotment option, they successfully issued 3.5 million new shares and existing shareholders also successfully sold 8 million shares.

Information on shareholders holding over 2% of the shares, including their sale information on August 15, is summarized below:

It can be observed that the majority of shareholders holding over 2% have an average cost below $10 and an investment horizon exceeding 10 years. There is a strong demand for cashing out after the unlocking in November, which may put further downward pressure on Circle's 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, with an offering price of $31 per share, raising approximately $1.05 billion and resulting in an IPO market capitalization of around $6.9 billion. The market enthusiasm was high on the debut day, with the stock price opening at $69, closing at $83.23, representing about a 168% increase from the IPO price. In the following weeks, Circle's stock price continued to surge and reached nearly $299 on June 23, 2025, representing over an 860% increase from the IPO price. This price corresponds to a fully diluted market value exceeding $83 billion, reflecting the market's euphoric expectations for the stablecoin business.

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 newly issued shares on August 15 but excluding shares that may be released through 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 Level: Based on the full-year 2024 performance (with revenue of about $16.8 billion and net profit of only about $156 million cls.cn), the $31.1 billion market cap implies a Price-to-Earnings (P/E) ratio of approximately 199x and a Price-to-Sales (P/S) ratio of about 18.5x. Such high multiples far exceed the average valuation levels of traditional financial and tech companies. Circle just achieved full-year profitability in 2024 with a very low net profit base, making it hard to support such a high valuation multiple.

- Forward Valuation Level: According to the latest Q2 earnings report, Circle's revenue and Adjusted EBITDA have seen significant growth, with year-over-year increases of 53% and 52%, respectively. However, due to the IPO-related non-cash expenses of $591 million (including a significant $424 million stock-based compensation expense), Circle is highly likely to have a negative net profit for the full year. Considering performance growth factors, assuming an optimistic scenario with a 58% revenue increase to $26.6 billion in 2025, the current stock price corresponds to a Forward P/S of approximately 11.7x. This indicates that the market has given Circle a significant premium, mainly due to viewing it as a scarce target in the crypto financial infrastructure, betting on its long-term profit 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, and the short-term price volatility and pullback risks should not be overlooked.

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 why Circle currently commands a scarcity valuation premium. We have chosen some related companies in the industry for reference:

- Coinbase (COIN): As a cryptocurrency exchange, while its business model differs from Circle's, it is similarly influenced by the cryptocurrency industry's growth.

- Visa, Mastercard: As traditional payment giants, with a 2025 projected P/E ratio in the 25–30x range, they represent the valuation levels of mature payment networks (with a historical net profit margin of around 50%). With near-monopoly positions and robust performance, Visa and Mastercard have long enjoyed a high and stable valuation premium. However, even though Circle operates in the payment ecosystem, it does not currently operate on a transaction fee basis like Visa and Mastercard, making it not a perfect comparable.

- U.S. Banking Sector: Circle's core business is net interest income, similar to banks. Looking at the average of U.S. banks, the current P/E ratio is generally under 10x, with a P/S ratio around 1x, reflecting the slow growth and steady profitability of traditional financial institutions, but lacking high valuation multiples.

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

Calculation Note: Market cap and stock price as of the close of September 15, 2025

*Given that Circle's 2025 profit data is impacted by IPO expenses, Circle's net margin and corresponding PE data are based on 24Q2-25Q1, with its EBITDA based on adjusted trailing-twelve-month EBITDA (adjusted EBITDA-TTM), while other stocks are based on the latest rolling data (24Q3-25Q2). Circle's actual rolling twelve-month net profit is currently negative.

From the table, we can see that although Circle's stock price has dropped by over 50% from its peak, it significantly outperforms most comparable companies in various dimensions mentioned earlier, while Circle's net margin is also significantly lower than theirs. Circle's EV/Revenue is around 14x, close to industry giants like Visa and Mastercard; however, Circle's profitability is not yet sufficient to support such a high revenue multiple, reflected in an EV/EBITDA ratio as high as 102, far exceeding 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 in 2028 and the corresponding valuation. Key variables in the scenarios include the circulation size 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 Federal Reserve sharply reducing interest rates to near 0% in 2026–2028, with short-term rates averaging only about 1%. In this environment, intensified competition, traditional payment players like PayPal eroding market share, USDC growth slowing, and market share declining.

Key Assumptions:

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

- Circle's average reserve yield is only 1.0% (rates near zero most of the time);

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

Financial Impact:

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

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

Valuation Projection:

In this performance setback scenario, the market may assign a price-to-earnings valuation multiple of only about 20×, resulting in a 2028 market value of around $2 billion, less than 10% of the current valuation. Even considering some level of growth premium, the valuation in the pessimistic scenario is far below the current level. This suggests that if this scenario materializes, Circle's stock price could drop significantly, posing a downside extreme scenario that investors need to beware of.

Baseline Scenario:

Assumes Circle successfully obtains a federal trust charter, and with compliance support, USDC maintains steady growth. On a macroeconomic front, the U.S. economy achieves a soft landing, and interest rates gradually return to neutral levels from 2025 to 2028 (short-term rates around 2.5%). In terms of the competitive landscape, USDC maintains its key stablecoin status with 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 around 2%;

- With economies of scale, the net profit margin is able to increase to 15%.

Financial Impact:

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

- Net profit is approximately $450 million, nearly tripling from 2024.

Valuation Derivation:

Assuming a growth company in 2028 is given a P/E valuation of around 25x, this corresponds to a market capitalization of about $10 billion. This is significantly lower than Circle's current $31 billion market cap, indicating that under the base case scenario, the current valuation is still relatively high, implying that the market pricing has already incorporated 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 greatly increased. Even if the valuation multiple compresses significantly from the current level, there is still room for market capitalization to rise compared to 2025. However, at the current stock price, the base case is not enough to support its $31 billion valuation, suggesting that there may be a lack of impetus for a breakout in the stock price in the medium term until the company's performance significantly surpasses the benchmark expectations.

Optimistic Scenario:

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

Key Assumptions:

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

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

- Coinbase's interest spread ratio is slightly reduced to 40% after renegotiation, while economies of scale drive net profit margin up to 20%.

Financial Impact:

- Circle is expected to generate approximately $7.5 billion in revenue by 2028;

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

Valuation Analysis:

If the market is willing to assign a high-growth company a P/E valuation of around 30× by 2028, Circle's market capitalization could reach approximately $45 billion. The current market cap of Circle is close to $30 billion, indicating a potential increase of around 50% to reach this optimistic valuation. This suggests that the current market pricing is broadly situated between the benchmark and optimistic scenarios. Buying at the current price in anticipation of this optimistic scenario may not be considered a bargain, but holding in the long term should not result in losses. Additionally, the surge in Circle's profits from 2025 to 2028 will rapidly absorb the high valuation, bringing Circle's P/E ratio back to a reasonable level of around 30× by 2028. In other words, buying and holding in an optimistic scenario could potentially yield a good medium- to long-term return for investors.

Scenario Analysis Summary:

Circle's long-term valuation is highly sensitive to key assumptions. The current market valuation is only reasonable under assumptions that align with the optimistic scenario; under benchmark or pessimistic scenarios, the valuation appears significantly inflated. Investors should carefully assess their confidence in the stablecoin market's growth and Circle's competitive position. If they believe the market will rapidly expand and that Circle will maintain its lead, the high valuation is likely to be gradually justified through performance growth; conversely, if growth falls short of expectations, the stock price may face downward valuation pressure.

Conclusion:

Circle's current valuation level is significantly higher than that of 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 undergone long-term validation, yet its price-to-sales ratio is close to theirs. This valuation dislocation is mainly driven by 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 in the coming years to gradually absorb it. Investors should closely monitor whether its actual revenue and profit can meet expectations. If the performance meets or even exceeds optimistic assumptions, the high valuation is likely to be rationalized; otherwise, there may be a risk of valuation correction.

In summary, the current valuation is only reasonable for investors who firmly believe that the stablecoin ecosystem will experience explosive growth and that Circle can continue to expand its business footprint in the foreseeable future. Otherwise, caution should be exercised against the downside risk resulting from a detachment 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:

- Stablecoin Industry Scarce Asset:

The stablecoin industry where Circle operates is currently in a rapid growth phase. The gradual clarification of the U.S. regulatory framework further strengthens the industry's long-term development certainty, attracting several giants to accelerate their presence. Although intensifying competition poses some pressure on Circle, it also confirms the market's recognition of the long-term value of stablecoins. Circle currently holds the second largest stablecoin market share and is the only publicly listed entity in the market, making its scarcity a key consideration factor in investor decision-making.

- Valuation Already 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 large extent, with some valuation logic even referencing its future position 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 fail to meet optimistic expectations, it may trigger a valuation correction.

- Mid-Term Financial Performance Under Pressure:

Circle's financial performance mainly depends on three key drivers: the expected growth in USDC supply with industry expansion and company operational optimization, but in the short term, the decline in U.S. Treasury bond yields, combined with high distribution and transaction costs, is expected to keep its revenue and profit margins under pressure for a period of time.

- Large Unlocking of Shares in November-December:

Shares from early investors will be unlocked in November-December, with the majority of the investment terms nearing or surpassing a decade, showing a strong exit demand. This event may significantly pressure Circle's stock price.

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

1. Obtaining a Banking License – If Circle receives approval for 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.

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

3. Mergers and Partnerships – Any deepening collaboration 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 toward "Neutral." The reason is: although Circle has a bright long-term outlook, the current price already fully, even preemptively, reflects optimistic expectations, with a low valuation safety margin. Considering the remaining macro and industry uncertainties, there is a high short-term volatility risk.

Long-Term Outlook:

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

In conclusion, Circle represents the trend of the integration of crypto finance and traditional finance. Its investment value depends on investors' judgment of the speed and depth of this trend's evolution.

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