Author: Leo Z
What is Circle?
Circle is the issuer of USDC. USDC is the world's second-largest stablecoin, with a circulating supply of approximately $77 billion, and each USDC is backed by equivalent dollar-denominated assets (primarily short-term U.S. Treasury securities).
Circle's revenue source is straightforward: it invests these reserves in U.S. Treasuries to earn the interest spread. For FY2025, total revenue was $2.75 billion, with 95% coming from reserve interest. Listed in June 2025, its current market cap is approximately $15–20 billion.
Circle's market valuation is roughly equal to «USDC circulating supply × interest rate × conservative multiple». This means: if you view Circle as merely an interest-earning company, the current valuation is reasonably accurate. If you believe it is evolving into a fee-based digital dollar infrastructure network, the current price far undershoots that potential value.
This article aims to answer: Is a transition happening? How much evidence is there? And what is it worth?
II. Core Issue: Is USDC being "held" or "used"?
Before discussing valuation, answer a question more important than any financial model.
For the same $77 billion in USDC, if it’s merely being held by institutions to earn interest, Circle is an interest-rate-sensitive financial company valued at 10–15x. If it’s being frequently used for payments, settlement, cross-border transfers, and developer integrations, Circle is evolving into a fee-based infrastructure network valued at 25–30x.
Two key data points can help you determine:
First, the on-chain transaction volume of USDC is growing much faster than its circulating supply. In FY2025, USDC’s circulating supply increased by 72%, while its on-chain transaction volume surged by 247%. This means each dollar of USDC is being used more frequently—not because the total supply is growing, but because its velocity is accelerating.
Second, USDC has surpassed USDT as the largest settlement asset. Visa Onchain Analytics filters out approximately 85% of on-chain noise (bots, internal exchange transfers, high-frequency arbitrage). After adjustment, USDC accounts for 64% of real economic settlement volume (Mizuho, February 2026), while USDT accounts for only about 28%—despite USDT’s circulating supply being 2.4 times that of USDC.
This gap itself is the strongest signal: USDC is transitioning from "an asset people hold" to "a network people use." But this shift is not yet complete—we’ll discuss what conditions are needed for it to be confirmed.
Three-tier income structure
Circle's revenue is divided into three layers. The market is currently pricing almost exclusively the first layer.
Layer 1: USDC Interest Income — How Circle Makes Money Today
USDC is the foundation of Circle and the source of 95% of its current revenue. As of the end of 2025, the circulating supply of USDC reached $75.3 billion, a 72% year-over-year increase, far exceeding Circle’s own annualized growth target of 40%.
The revenue model is simple: approximately 80% of the USDC reserves are invested in short-term U.S. Treasury securities through the USDXX fund managed by BlackRock, earning the interest spread.
Interest income ≈ Average USDC circulating supply × Reserve yield
The reserve yield for Q4 2025 was 3.81%, a decrease of 68 basis points from the previous quarter. This highlights the core contradiction: circulating supply is growing rapidly, while yields are declining, creating a hedging effect. If the Fed’s target rate falls to 3%, Circle would need USDC to grow beyond $150 billion to maintain its current income level.
Structural issue: Coinbase takes the majority of the revenue. Under the revenue-sharing agreement signed in 2023, 100% of the interest earned on USDC on the Coinbase platform goes to Coinbase, while Coinbase takes 50% of the interest earned outside the platform. In FY2025, for every dollar of interest Circle earns, approximately 60 cents goes to distribution partners.
The good news is that profit margins are improving. The RLDC (Revenue Less Distribution Costs) margin expanded from 30.0% in Q4 2024 to 40.1% in Q4 2025. Net income margin is 1.2%-1.8%, after deducting Coinbase revenue share and operating costs.
Layer 2: Payment and Transaction Revenue — A Rapidly Growing Business
This is the key to whether Circle can shed the label of being an “interest rate company.”
The Circle Payments Network (CPN) launched in May 2025, enabling banks, payment companies, and enterprises to conduct 24/7 cross-border settlements powered by USDC. As of February 2026, its annualized TPV reached $5.7 billion, representing approximately 100x growth since launch. Fifty-five institutions are already integrated, seventy-four are under review, and over 500 are in the pipeline. CPN serves 14 markets, including Brazil, Canada, Hong Kong, India, Mexico, Nigeria, and the United States.
But $57 billion is less than four ten-thousandths of the global cross-border payments market, which is $16 trillion. CPN’s value lies not in its current scale, but in whether its growth can be sustained. If it captures just 1% of the cross-border market, that would amount to $160 billion in annualized transaction volume—generating fees that could approach or even exceed interest income, and remain unaffected by interest rates.
CCTP (Cross-Chain Transfer Protocol) enables native cross-chain transfers of USDC through a "burn-and-mint" mechanism. In Q4 2025, it processed $41.3 billion, a 3.7x year-over-year increase. USDC’s cross-chain market share rose from 25% at the end of 2024 to 62% in January 2026, covering 30 chains. CCTP V2 introduces Fast Transfer fees—a new revenue stream.
Other Revenue is the most direct "evidence of transformation." In FY2025, it surged from $3 million per quarter to $37 million per quarter, including $24.7 million from subscription services, $12.2 million from trading revenue, and $7 million from Canton Network validation node income. Management guidance projects $150–170 million for 2026.
This portion of revenue is not affected by interest rates and does not require revenue sharing with Coinbase. When it exceeds 10% of total revenue, the market may begin to value Circle using a different methodology. It is currently around 4%.
Layer 3: Settlement Platform — Long-Term Possibilities
Arc is an institutional-grade settlement chain planned by Circle for mainnet launch in 2026, with USDC as the native gas token. The testnet has already processed over 166 million transactions, with confirmation times of 0.5 seconds and over 100 institutions participating, including Goldman Sachs and Mastercard.
Arc's roadmap consists of four phases:
M1 Public Testnet (Completed) → M2 Real Funds On-chain (2026) → M3 Implementation of Margin/Collateral/Settlement Scenarios (2027-28) → M4 Integration into Institutional Standard Operating Procedures (2029-30)
Before M2, Arc had no value. But if it ultimately becomes an institutional-grade settlement standard, Circle’s value will no longer be that of a “fee-based company,” but a “platform company.” This is a necessary condition for returns of 10x or more.
Four: Assessing Whether the Transition Is Occurring: Seven Dimensions
Relying on any single metric can lead to misjudgment. The key is to see whether multiple dimensions are improving simultaneously—when scale, activity, profitability, new revenue, and user growth all point in the same direction, transformation is taking place.
Five: Three Most Important Tracking Metrics
① USDC Circulating Supply (view daily)
The base for Circle's revenue is: circulating supply × reserve yield = interest income. Track the "quarterly average circulating supply" rather than an end-of-period snapshot. Currently approximately $77 billion.
Data sources: defillama.com/stablecoin/usd-coin (daily updated), circle.com/transparency (weekly reserve proofs)
② Percentage of USDC in Visa's adjusted transaction volume (weekly)
The core question: Is USDC being used or just held? Supply accounts for only 25%, but adjusted trading volume makes up 64%—each dollar of USDC is doing 2 to 3 times the work of USDT.
Data source: visaonchainanalytics.com → Filter by Stablecoin → Click "Show % of Total" → Read the USDC line
③ Other Revenue Non-interest Income (Quarterly)
The only metric that directly proves Circle earns money beyond interest. Unaffected by interest rates and not shared with Coinbase. Currently $37 million per quarter, guidance of $150-170 million (2026). Valuation methodology changes when it exceeds 10% of total revenue.
Data sources: circle.com/pressroom (quarterly earnings), SEC EDGAR search for Circle Internet Group
Six: Recent Catalysts
Coinbase profit-sharing agreement expires (August 2026)
This is the largest single catalyst in 24 months. Currently, Circle distributes about 60% of its revenue to partners. If renegotiation increases RLDC’s profit margin from 40% to 50–55%, it would be equivalent to an immediate 25–35% increase in profits. However, Coinbase has little incentive to make significant concessions—USDC distribution on Coinbase’s platform remains Circle’s largest growth engine. The outcome is uncertain, but the probability of a better direction than the status quo is higher.
OCC national bank charter
Conditionally approved in December 2025. Full approval means: direct access to a primary account at the Federal Reserve (earning IORB interest, eliminating counterparty risk), bypassing commercial banks to handle $483 billion annually in minting/redemption flows, and establishing an insurmountable trust barrier for corporate and government adoption of USDC. No other stablecoin issuer has this.
x402 Foundation (established in April 2026)
Coinbase has contributed the x402 payment protocol to the Linux Foundation. x402 activates the HTTP 402 status code as a native internet payment layer, enabling AI agents, APIs, and applications to settle payments directly within HTTP interactions—by default using USDC.
Participants: Google, AWS, Stripe, Visa, Mastercard, Amex, Shopify, Microsoft, Cloudflare, Circle. If x402 becomes the AI agent payment standard, every machine-to-machine microtransaction will increase the velocity of USDC without increasing its supply.
Note: x402 is led by Coinbase, not Circle. Impact on CRCL: mildly bullish, expands use cases for USDC but does not change the fundamental scale.
Seven: Conditions for 5x to 10x returns
3-5x (high confidence) — driven solely by USDC growth
USDC is projected to reach $200-300B by 2028 at a 40% CAGR. Even at interest rates of 3%, $250B × 1.5% net spread = $3.75B in net income. At a 20x multiple, market cap reaches $75B. From the current $150-200B to $75B, that’s roughly 4x growth—without any contribution from CPN or Arc.
10x (requires multiple conditions to be met simultaneously)
From $15-20B to $150-200B, both must occur:
CPN TPV will exceed $100 billion within 2-3 years, with at least one major corridor entering official production.
2. Coinbase fee split agreement improved, RLDC profit margin exceeds 50%
3. Other Revenue exceeds 10% of total revenue, demonstrating scalable non-interest income.
4. Arc reaches at least the M2 stage (real funds on-chain), beginning to be priced by the market
Of these four conditions, only the second (profit margin) is currently showing clear improvement. A 10x position is one you 'earn,' not one you 'bet on.'
Eight, Major Risks
Interest rates are declining faster than the growth of USDC
In Q4 2025, this signal emerged: a 68 bps interest rate cut partially offset the 100% increase in circulating supply. If the Fed lowers rates to 2.5-3% in 2026-2027, a window of 1-2 quarters with earnings below expectations could emerge.
Tether compliance
USDC's biggest differentiator is compliance. But Tether earned $10 billion in the first three quarters of 2025 and is currently negotiating a full audit with the Big Four accounting firms. If Tether achieves compliance within 2–3 years, USDC’s differentiating advantage will be significantly weakened. USDT currently holds over 60% market share and a market cap of $183 billion—it has ample resources.
Yield-bearing new stablecoin competition & payment giants like Stripe
New stablecoins like Ethena (USDe) and Sky are gaining market share by directly paying yields to holders. Circle, constrained by its regulatory positioning, is currently unable to pay interest directly to USDC holders.
Stripe is a founding member of the x402 Foundation and is also building its own stablecoin payment system. Stripe’s strategy is to support all viable standards—its participation does not imply exclusive support for USDC, nor does it rule out Stripe launching its own stablecoin or deeply integrating USDT in the future.
IX. Conclusion
Circle is not a company that is guaranteed to become a trillion-dollar company. But it may be one of the few fintech companies today with the structural conditions to reach that ceiling.
The current pricing almost exclusively reflects USDC interest income. The market is asking: Is Circle fundamentally an interest-driven financial company, or a fee-based digital dollar infrastructure? The answer isn’t settled yet—but data is leaning toward the latter.
The core of tracking lies in three things: whether USDC circulation is growing, whether each dollar of USDC is being used more frequently, and whether revenue beyond interest is increasing. When all three improve simultaneously, transformation is taking place.
Data sources: Circle IR, SEC EDGAR, DefiLlama, Visa Onchain Analytics, Artemis Terminal, CoinDesk, Mizuho Research
Disclaimer: This article does not constitute investment advice. All data is current as of April 2026.