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Why everyone is wrong about Circle
Here’s the bull case for Circle and why most people are missing it
Jevgenijs Kazanins
July 20, 2025
Hey!
Circle’s IPO will go down in the history books. Priced at $31 a share at the IPO, the stock almost touched $300 before settling just under $200.
And yet, all I hear are bear cases with most of them centered around interest rates falling and Circle paying half of its revenue to Coinbase for the distribution of USDC.
No one is standing up for Circle, despite USDC’s central role in finally pushing financial infrastructure onchain.
So here’s my bull case. Feel free to throw stones at me on Twitter.
Jevgenijs
p.s. this article was first published in “This Week in Fintech” newsletter
What is Circle?
Circle $CRCL ( ▼ 4.81% ) is the company behind USDC, a digital dollar, or stablecoin, used in DeFi, trading and payments. With more than $60 billion in circulation, USDC ranks as the second-largest stablecoin globally.
Image source: Circle
Circle was founded in 2013 with the idea of making Bitcoin easier to use for everyday payments. At the time, it launched a consumer-facing app that let people buy, sell, and send Bitcoin. But as crypto evolved, so did Circle’s vision.
In 2018, the company partnered with Coinbase to launch USDC, a regulated, dollar-backed stablecoin. That marked a major pivot toward infrastructure and financial services, with Circle focusing on building the plumbing for an onchain economy.
"We envisioned the development of an “HTTP for Money,” a protocol for dollars and other fiat digital currency tokens that would provide an open and programmable infrastructure to rebuild the global financial system in the image of the internet."
In 2022, Circle also launched EURC, a euro-backed stablecoin.
What is a stablecoin?
Stablecoins are digital tokens that track the value of real-world currencies, like the U.S. dollar. USDC, for example, is always redeemable 1:1 for dollars and backed by cash and U.S. Treasuries.
Image source: Circle
The transition from cash to digital payments, made possible by the Internet and modern banking infrastructure, opened up a world of new possibilities such as using a debit card anywhere in the world, shopping online, or sending money to friends with Venmo.
Similarly, institutions come to Circle and exchange fiat money for USDC to access the world of blockchains, crypto, and Decentralized Finance. Circle doesn’t work directly with consumers, so distribution partners like Coinbase typically handle onboarding and access.
"Built for rapid global payments and 24/7 financial markets, USDC is a regulated digital currency that is redeemable 1:1 for US dollars."
As you may have noticed from the screenshots, Circle presents itself as the most compliant and regulated stablecoin issuer, while USDC is positioned as the safest and most trusted digital dollar.
How does Circle make money?
Circle’s primary source of income is the interest earned on stablecoin reserves. When it receives fiat in exchange for USDC or EURC (the process called "issuing" or "minting"), it either deposits the funds with partner banks or invests them in short-term debt securities like U.S. Treasuries.
Image source: Circle
"As of March 31, 2025, we held approximately 90% of USDC reserves in the Circle Reserve Fund, a government money market fund managed by BlackRock, one of the world’s largest asset managers, and available only to us."
At the moment, Circle’s revenue depends on two factors: the total amount of stablecoins it has issued (USDC and EURC "in circulation") and the interest it earns on the reserves backing those stablecoins. In 2024, this “reserve income” contributed $1.66 billion, accounting for 99% of the company’s total revenue.
Image source: Circle, Form S-1
"The monetization of the Circle stablecoin network is driven by its growth and our introduction of new products that expand its utility. Today, we monetize the amount of money on the network (i.e., the amount of Circle stablecoins in circulation). We earn reserve income on USDC reserve assets."
As an example, in 2024, the average USDC in circulation was $33.3 billion, and Circle earned the average "reserve return rate" of 5.0% (The amount of EURC in circulation is minimal and can be disregarded for now). As shown in the table below, while USDC circulation was higher in 2022, Circle earned a much higher return on reserves in 2024, resulting in more than double the revenue.
Image source: Circle, Form S-1
"Circle earns reserve income on reserve assets, historically at rates at a discount to the prevailing SOFR [ Secured Overnight Financing Rate, a benchmark interest rate based on the cost of overnight borrowing using U.S. Treasuries as a collateral] during the applicable periods. We term the rate of return generated on assets held in reserve as the “reserve return rate.”
Circle does generate non-interest revenue, but it’s currently minimal, less than 1% of total revenue. This limited diversification of revenue is central to the bear case against Circle, and, as I’ll argue below, also a key part of the bull case.
"In addition, we may seek to monetize the activity on our network with products that earn fee-based revenues based on transactions and usage in the future."
Circle’s largest expense is distribution. Since it relies on partners, primarily Coinbase, to market and distribute its stablecoins, a significant share of revenue goes to them. In 2024, distribution and transaction costs totaled $1.01 billion (60% of revenue), with $908 million (54% of revenue) paid to Coinbase.
Image source: Circle, Form S-1
"For the years ended December 31, 2024, 2023, and 2022, we incurred $907.9 million, $691.3 million, and $248.1 million, respectively, of distribution costs in connection with our agreements with Coinbase."
In 2024, Circle reported $156 million in net income and $285 million in adjusted EBITDA, down from $268 million and $395 million, respectively, in 2023. The decline was primarily driven by higher distribution costs following the renegotiation of terms with Coinbase (more on that below).
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