The long-anticipated initial public offering (IPO) of Circle, the issuer behind the widely used stablecoin USDC, has finally taken a formal step forward — but not without raising serious questions about its business model, sustainability, and timing. After years of delays and shifting strategies, Circle has filed an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC), aiming to list on the New York Stock Exchange under the ticker "CRCL." While this marks a milestone for the crypto-native financial firm, growing scrutiny around its valuation, revenue concentration, and rising operational costs paints a complex picture of its path to profitability.
A Shrinking Valuation and Strategic Share Deal with Coinbase
Circle’s latest IPO filing comes amid a significantly reduced valuation compared to previous estimates. Once valued at $9 billion during merger discussions in 2022, the company now targets a range between $4 billion and $5 billion — nearly half its peak. According to Forbes, this downward revision reflects both market realities and investor skepticism in the current macroeconomic climate.
A pivotal moment in Circle’s journey toward full control of USDC occurred in August 2023, when it acquired the remaining 50% stake in the Centre Consortium from Coinbase. The Centre Consortium, originally a joint venture established in 2018 by Circle and Coinbase, was responsible for governing the issuance and standards of USDC. In exchange for full ownership, Circle issued approximately 8.4 million shares — valued at $209.9 million — to Coinbase. This transaction effectively dissolved the consortium by December 2023, transferring all net assets to a wholly owned Circle subsidiary.
This strategic move granted Circle complete autonomy over USDC’s development and governance. However, it also deepened its financial entanglement with Coinbase, which remains a dominant distribution channel for the stablecoin. Notably, this share-based acquisition preserved Circle’s cash reserves, avoiding immediate liquidity strain — a crucial consideration given its mounting expenses.
Revenue Model Under Scrutiny: Over-Reliance on U.S. Treasury Yields
At the heart of investor concerns lies Circle’s core revenue engine: interest income from USDC reserves. In 2024, Circle reported total revenue of $1.676 billion, with over 99% derived from reserve earnings — primarily generated through investments in U.S. Treasury bonds. This model effectively positions Circle as a digital-era money market fund rather than a traditional technology or payments platform.
While high Treasury yields boosted income during periods of elevated interest rates, this dependency introduces significant risk as Federal Reserve rate cuts loom. Should interest rates decline, Circle’s primary revenue stream would face direct pressure, threatening margins and long-term growth projections.
Moreover, the scalability of this model is increasingly questioned. As the stablecoin market matures and competition intensifies — with players like PayPal (PYUSD), JPMorgan (JPM Coin), Visa, Fidelity, and Ripple entering the space — yield-based income alone may no longer suffice to justify premium valuations.
Soaring Distribution Costs and the Coinbase Commission Burden
Even as revenues rose in 2024, Circle’s net profit fell sharply — dropping 41.8% year-over-year to $155.67 million. The culprit? A dramatic increase in distribution and transaction costs, which reached $1.01 billion in 2024, consuming 60.7% of total revenue.
A major contributor to this cost surge is Coinbase, which serves as a primary distribution hub for USDC. According to public disclosures, Coinbase earned $225.9 million from USDC-related revenue in Q4 2024 alone — suggesting an annual take of nearly $900 million. This stems from a revenue-sharing agreement wherein Coinbase receives 50% of the residual earnings from USDC reserves held on its platform.
Crucially, this share is dynamic: it increases as more USDC is held on Coinbase’s exchange. With Coinbase-hosted USDC rising from just 5% of total supply in 2022 to 20% in 2024, the platform’s cut has grown substantially — directly eroding Circle’s bottom line.
Matthew Sigel, Head of Digital Asset Research at VanEck, noted that while overall revenue expanded, rising distribution costs negatively impacted EBITDA and net income. He emphasized that Circle has little control over Coinbase’s business decisions — including listing policies, fee structures, or marketing priorities — making its financial outlook partially dependent on a third party.
Diversification Efforts and Competitive Pressures
Recognizing these vulnerabilities, Circle has actively expanded its global network of partners beyond Coinbase. Strategic collaborations with major fintech players such as Grab (Southeast Asia), Nubank (Latin America), and Mercado Libre (Latin America) aim to broaden USDC adoption across emerging markets and reduce reliance on any single platform.
These partnerships signal a shift toward embedding USDC into real-world financial ecosystems — from remittances and e-commerce to cross-border payments — potentially unlocking new use cases beyond speculative trading.
Yet challenges remain. As Omar Kanji, Partner at Dragonfly Capital, pointed out, Circle’s current valuation appears disconnected from fundamentals: distribution costs are eroding margins, core revenue drivers are plateauing, and annual compensation expenses exceed $250 million. In his view, the IPO feels less like a growth play and more like a monetization exit before larger institutional players dominate the stablecoin landscape.
Wyatt Lonergan of VanEck Ventures offered a more balanced perspective: “As the overall stablecoin market grows, issuers’ profit margins will likely shrink. Success will depend on diversifying revenue beyond net interest margins and building scalable distribution networks.”
He highlighted three key trends shaping the future:
- B2B revenue-sharing models will persist.
- Profit margins will compress as competition increases.
- Long-term viability requires diversified income streams — including transaction fees, embedded finance services, and API monetization.
FAQ: Addressing Key Investor Questions
Q: Why is Circle’s IPO happening now?
A: Favorable regulatory momentum in the U.S., including proposed stablecoin legislation like the GENIUS Act, has created a window for compliant crypto firms to go public. Increased institutional interest in stablecoins also supports market readiness.
Q: Is Circle profitable?
A: Yes, but margins are shrinking. In 2024, net profit was $155.67 million — down significantly from the prior year due to rising distribution costs.
Q: How does Circle make money?
A: Primarily through interest earned on U.S. Treasury securities backing USDC reserves. Over 99% of its 2024 revenue came from this source.
Q: What are the biggest risks to Circle’s business?
A: Dependence on high interest rates, escalating distribution costs (especially to Coinbase), and increasing competition from banks and fintechs launching their own stablecoins.
Q: Can Circle reduce its reliance on Coinbase?
A: It’s trying. Partnerships with Grab, Nubank, and others aim to diversify distribution. However, Coinbase remains a critical channel for liquidity and user access.
Q: Will Circle’s IPO succeed?
A: Success depends on investor appetite for yield-dependent crypto businesses amid rate cut expectations and whether Circle can convincingly demonstrate a path to margin expansion and revenue diversification.
Final Outlook: Opportunity Meets Uncertainty
Circle’s IPO represents both a culmination of years of effort and a high-stakes test of market confidence in crypto-native financial models. While improved regulation and growing stablecoin adoption provide tailwinds, fundamental concerns around valuation, cost structure, and revenue concentration cannot be ignored.
The company must now convince investors that USDC’s scale — currently the second-largest stablecoin by market cap — translates into durable economic advantage, even as profit-sharing agreements eat into earnings and interest rate tailwinds fade.
Ultimately, Circle’s ability to evolve beyond a Treasury yield play and build a diversified financial infrastructure will determine not just its IPO success, but its long-term relevance in the global digital economy.
Core Keywords: Circle IPO, USDC stablecoin, stablecoin regulation, crypto company valuation, US Treasury yields, Coinbase revenue share, digital asset finance