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

Written by: Lawrence Lee

1. Research Summary

The key points regarding the valuation and investment in Circle are summarized as follows:

• Scarcity in the stablecoin industry: Circle is in the rapidly developing stablecoin sector. The gradual clarification of the U.S. regulatory framework further strengthens the long-term development certainty of the industry, attracting several giants to accelerate their layouts. Although intensified competition poses certain pressure on Circle, it also confirms the market's recognition of the long-term value of the stablecoin sector. Circle currently holds the second-largest market share in the stablecoin market and is the only publicly traded entity available for investment, making this scarcity an important consideration for investors' decisions.
• Valuation already reflects high growth expectations: From various valuation metrics, Circle's current valuation level is high, reflecting that the market has already priced in its growth prospects quite fully, with some valuation logic even referencing its future position as a leader in financial infrastructure. Future stock price movements will heavily depend on whether the company's actual performance matches or exceeds market expectations. If quarterly financial performance or key operational metrics do not meet optimistic expectations, it may trigger a valuation correction.
• Mid-term financial performance under pressure: Circle's financial performance mainly depends on three driving factors: the supply of USDC is expected to continue growing with industry expansion and company operational optimization, but in the short term, U.S. Treasury rates are entering a downward cycle, coupled with high distribution and transaction costs, which is expected to put pressure on its revenue and profit margins for the foreseeable future.
• Significant unlock in November-December: Shares from early investors will be unlocked in a concentrated manner in November-December, with most investment periods nearing or exceeding ten years, creating 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 may impact Circle's valuation:
• Obtaining a banking license – If Circle receives OCC approval for a trust license, it will become the first stablecoin bank in the U.S., significantly increasing its status and trustworthiness, potentially triggering a revaluation.
• Progress in business diversification – If Circle announces new revenue sources (such as launching a payment fee scheme) that exceed market expectations, it will improve the perception of interest rate dependence and boost valuation.
• Mergers and collaborations – Any deepened cooperation with large banks/technology companies or potential mergers (such as being acquired by a larger financial institution) will affect the market's judgment of its ultimate value.
• Conversely, negative catalysts such as a sudden interest rate cut by the Federal Reserve, competitors launching stablecoins, or security incidents will suppress valuation.

Investment Recommendation:

Based on the above, we lean towards a "neutral" stance on Circle's stock. The reason is that while Circle has a bright long-term outlook, the current price has fully or even overly reflected optimistic expectations, resulting in a low margin of safety in valuation. Considering the existing uncertainties in the macro and industry environments, the short-term volatility risk is relatively high.

PS: This article reflects the author's thoughts as of the time of publication, which may change in the future, and the views expressed are highly subjective and may contain errors in facts, data, or reasoning logic. All opinions in this article are not investment advice, and criticism and further discussion from peers and readers are welcome.

2. Business and Product Lines

Circle Internet Financial was founded in 2013 by Jeremy Allaire and Sean Neville, with the mission of "enhancing global economic prosperity through frictionless value exchange." Since its inception, the company has focused on the crypto payment sector, but its development has not been smooth. During this process, Circle actively explored other business directions, including establishing the cryptocurrency market-making platform Circle Trade, acquiring the cryptocurrency exchange Poloniex, and merging with the crowdfunding platform SeedInvest.

In 2018, Circle and Coinbase jointly established the Centre consortium and launched the USD Coin (USDC), a dollar stablecoin positioned as a compliant and transparent digital dollar vehicle. USDC quickly grew to become the second-largest stablecoin globally, second only to Tether (USDT). Subsequently, Circle gradually divested non-core assets such as Poloniex and SeedInvest, focusing its strategic efforts on stablecoins and 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. Specifically, it includes:

2.1 Stablecoin Issuance and Reserve Management

USDCoin (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 was 72.7 billion. Circle promises that for every USDC issued, it holds an equivalent reserve asset of one dollar in a bank custody account or compliant fund, ensuring that USDC maintains a 1:1 peg to the dollar. The company employs a daily monitoring and T+2 settlement mechanism: after users submit a request to mint USDC in their Circle accounts, Circle immediately generates the corresponding USDC on the blockchain and sends it to the user's wallet upon confirming the arrival of fiat currency; the redemption process is the reverse, where Circle destroys USDC and returns the equivalent fiat currency to the user. This "in-and-out" mechanism ensures a stable supply of USDC.

Composition of Reserve Assets

Circle implements a strict reserve management policy, investing reserve assets only in cash and U.S. government bonds with maturities not exceeding three months to ensure they are "safe, highly liquid, and transparent." According to the latest disclosure as of July 31, 2025, approximately 85% of USDC reserves are in dollar market funds (primarily holding U.S. Treasury bonds), and 15% are deposits in Global Systemically Important Banks (GSIBs). This means that the vast majority of reserve assets are redeemable on a daily basis, capable of meeting concentrated redemption demands.

Circle has partnered with BlackRock to establish the "Circle Reserve Fund," placing Treasury-like reserve assets in this SEC-registered fund, which is managed by BlackRock. The fund's holdings and net value are publicly disclosed regularly, with Circle as the initiator and beneficiary, not directly intervening in investment decisions, thereby enhancing the professionalism and transparency of reserve operations. The remaining cash reserves are diversified across several Global Systemically Important Banks (such as BNY Mellon, JPMorgan, etc.) to support daily redemption liquidity and payment system integration.

Reserve Transparency and Auditing

Circle views transparency as the cornerstone of the USDC trust system. Since its issuance in 2018, the company has hired independent auditing firms monthly to provide reserve attestation reports, disclosing the circulating supply of USDC and the corresponding details of reserve assets. Currently, Deloitte provides assurance services. Audit reports consistently indicate that the total value of USDC reserve assets slightly exceeds the total value of USDC in circulation, reflecting a 100% reserve ratio and risk buffer mechanism. Circle's own funds and USDC reserves are strictly segregated to prevent misappropriation risks.

In contrast to Tether, which faced regulatory penalties due to reserve opacity, Circle's self-regulatory transparency strategy has earned the trust of regulators and institutional clients. In 2023, Circle was the first to respond to SEC accounting guidelines by detailing USDC reserve fund holdings in its 10-K financial report. As the company progresses towards going public, Circle will submit financial and operational data to the SEC quarterly, further enhancing operational transparency and market confidence.

EURC and Other Currency Expansions

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

Circle has indicated that it will explore issuing stablecoins for other G10 currencies (such as the British pound, Japanese yen, etc.) based on market demand and regulatory environment. The company recently received preliminary approval in Abu Dhabi Global Market in the UAE to provide payment services, including stablecoins, suggesting a potential entry into the Middle Eastern market and even the launch of stablecoin products pegged to local currencies (such as the dirham). Through multi-currency expansion, Circle aims to build a stablecoin matrix covering mainstream fiat currencies, solidifying its leading position in the global stablecoin sector.

2.2 Payment Settlement and Corporate Treasury Services

Circle Business Accounts

Circle provides comprehensive Circle Account services for corporate and financial institution clients. Through a single account, clients can achieve two-way conversion, receipt, and balance management of fiat currencies and digital currencies like USDC. For example, in cross-border e-commerce: companies can recharge their Circle accounts with dollars and instantly convert them to USDC to pay overseas suppliers directly; suppliers can also convert USDC to local fiat currency at any time. The entire process takes only a few minutes, significantly improving efficiency compared to traditional SWIFT remittances.

Circle accounts support various fiat currency deposit and withdrawal channels, including ACH, SWIFT, wire transfers, and SEPA, achieving extensive coverage through connections with global banks and payment networks. In terms of blockchain payments, accounts support multi-chain USDC receiving addresses, allowing clients to choose networks (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 operation needs.

Payments API

Circle's payment API allows developers to integrate fiat and stablecoin payment functionalities into their own platforms. Through API calls, merchants can receive customer payments and convert them to USDC in real-time. For example, if a user pays $100 with a credit card, the merchant can use the Circle API to instantly convert that amount to USDC and deposit it into their Circle account, avoiding high costs and exchange rate risks associated with cross-border settlements while maintaining a seamless and transparent user payment experience.

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

Treasury and Exchange Services

Circle provides essential treasury infrastructure for digital asset exchanges and brokers. Traditional banking channels often face issues such as slow speeds and complex compliance, but after integrating with Circle accounts, exchanges can quickly convert user deposits in dollars to USDC, achieving near real-time on-chain settlement; during withdrawals, cross-chain transfers and local conversions are completed using USDC, significantly enhancing efficiency and user experience.

Currently, many trading platforms, including Coinbase, widely use USDC as a dollar alternative. Although the trading volume of USDC on centralized platforms is still lower than that of USDT, it accounts for about one-third of the volume on leading exchanges like Binance. Circle supports exchanges and institutions in efficiently completing bulk USDC purchases and redemptions through its large client OTC minting service, which is particularly helpful in stabilizing liquidity during market fluctuations.

Additionally, Circle's API supports large-scale OTC trading and clearing, such as using USDC for settling loans and securities transactions between institutions, thereby avoiding delays in cross-border bank settlements. Overall, Circle's payment and treasury services directly serve end-use cases like e-commerce and remittances while also providing support as underlying financial infrastructure for exchanges and institutions. This enterprise customer-centric model broadens the application ecosystem of USDC, enhancing business stickiness and customer bonds.

2.3 Developer Platform and Wallet Services

Wallet API and Development Tools

Circle has launched a series of developer tools to lower the integration threshold for blockchain functionalities. 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, check balances, and initiate transfers for users through API calls, with secure key custody and signing handled uniformly by Circle's backend.

These services are particularly suitable for traditional enterprises looking to introduce digital asset functionalities. For example, gaming companies can use the Wallet API to create USDC wallets for players, distribute game rewards, and support cash-out exchanges without needing deep blockchain technical capabilities. Circle also provides blockchain node services and smart contract interfaces, supporting interactions with multiple chains like Ethereum and Solana, thereby improving development efficiency.

In 2022, Circle further strengthened institutional-level security features such as multi-signature wallets and permission management through the acquisition of CYBAVO, helping clients securely custody large amounts of digital assets. This series of initiatives aims to position Circle as the "AWS of the blockchain space," driving traditional applications to connect with the stablecoin ecosystem through underlying digital currency services. Although current API service revenue is relatively small, its strategic significance lies in expanding the application scale and circulation of USDC, indirectly promoting core business growth.

Cross-Chain Interoperability and CCTP

USDC is currently deployed on the Ethereum mainnet, multiple Layer 2 networks (such as Arbitrum and Optimism), Solana, Avalanche, Tron, and over 10 other blockchains. To address the issue of fragmented liquidity across multiple chains, Circle 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 "destroying USDC on the original chain and minting an equivalent amount of USDC on the target chain," with Circle issuing certificates to ensure the process is secure and trustworthy. This protocol gained widespread attention in 2023 and is seen as an important innovation for addressing cross-chain bridge security risks and achieving efficient value transfer. CCTP not only strengthens Circle's management capabilities for USDC's cross-chain liquidity but also enhances the consistency of USDC in a multi-chain environment (total supply remains unchanged, only migrating between chains), further solidifying Circle's core position in the stablecoin ecosystem.

2.4 Future Product Line Expansion

Looking ahead, Circle is actively expanding new products and services to broaden revenue sources and consolidate its ecological advantages:

• Stablecoin Blockchain ARC: In August 2025, Circle announced the launch of an open-source Layer 1 blockchain ARC designed specifically for stablecoins. This chain uses USDC as its native gas token, features a built-in foreign exchange engine, supports round-the-clock peer-to-peer on-chain settlements, and is EVM-compatible. The ARC testnet is expected to launch this fall, with the mainnet planned for 2026. ARC will become the core carrier of Circle's future business, with multiple services built on this chain.
• Cross-Border Foreign Exchange: After the launch of ARC, Circle can develop cross-border foreign exchange services based on USDC/EURC, enabling rapid exchanges between dollars and euros, providing better rates and efficiency than traditional foreign exchange channels, thus tapping into the multi-trillion-dollar foreign exchange market.
• Digital Identity and Compliance: To meet compliance requirements, Circle may launch on-chain identity verification services, allowing institutions to verify the KYC status of counterparty addresses, building a "permissioned stablecoin" ecosystem to attract financial institutions sensitive to anonymous transactions to use the USDC network.
• Lending and Yield Products: Although current laws restrict stablecoins from paying interest to the public, Circle can still conduct USDC lending services on the institutional side, such as accepting collateral and lending USDC to earn interest, similar to securities lending. If regulations allow, Circle may restart periodic yield products for institutions (such as "Circle Yield"), expanding profit channels under strict risk control.
• CBDC Collaboration: As central banks in various countries advance digital currency (CBDC) plans, Circle can play a role in technology provision or distribution. For example, Circle may participate in the UK's planned digital pound pilot, becoming a private distribution entity providing exchange and custody services. The company is also actively exploring collaborations with CBDC teams from other countries to maintain its core position in the digital currency space.

In summary, Circle is gradually evolving from a single stablecoin issuer to a comprehensive digital financial ecosystem covering "stablecoins + payments + developer + banking services." Through horizontal and vertical business expansion, Circle not only opens up new growth spaces but also embeds itself more deeply into the digital economy's infrastructure. As the synergies of various business lines are released, Circle is expected to build a digital financial network centered around USDC, creating long-term value for 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 profound insights into open networks and the fintech sector and is widely regarded as a representative figure in the stablecoin industry, frequently participating in U.S. congressional hearings and policy discussions, actively advocating for reasonable regulation of the industry.

Another co-founder, Sean Neville, served as president in the early days of the company, laying the foundation for products and technology. He transitioned to a board advisor role in 2019 and still holds shares in the company.

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

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

Overall, Circle's management team combines technological innovation thinking with rigorous compliance awareness, laying a solid foundation for the company to maintain stable operations during rapid development.

3.2 Board of Directors and Governance

In 2018, Circle and Coinbase jointly established the Centre Consortium, specifically responsible for USDC-related matters, with both parties holding a 50% stake. In 2023, Circle restructured its partnership with Coinbase, taking direct management of USDC affairs, with Coinbase relinquishing its original equity stake in favor of holding a small amount of Circle's equity while retaining a 50% revenue-sharing right from USDC (detailed in Section 5.2 "Distribution and Trading Costs" below). Therefore, Coinbase continues to play an important role in the development of USDC and remains a member of Circle's board of directors.

In addition to Coinbase, Circle's board also brings together industry veterans and representatives of strategic investors. The chairman is Jeremy Allaire, with investment representatives from funds such as Goldman Sachs, Excel, and Breyer, ensuring that the company's strategy considers investor interests. At the same time, Circle has introduced several independent directors, including Heath Tarbert, former chairman of the U.S. Federal Deposit Insurance Corporation (FDIC), who have deep regulatory backgrounds, providing strong support for the company's listing process and compliance operations.

3.3 Governance Structure and Shareholder Rights

Circle adopts a dual-class share structure: Class A common shares are available to public investors, while Class B shares are held by the founding team and early investors, enjoying 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 could interfere with long-term development plans.

The company has completed multiple rounds of internal governance optimization before its IPO, such as establishing an audit committee and compliance and risk committee, led by independent directors to oversee financial reporting and risk management. According to the prospectus, Circle has established a comprehensive internal control system for anti-money laundering (AML) and sanctions compliance, equipped with a dedicated compliance officer team, and conducts real-time monitoring of large and unusual transactions, promptly reporting suspicious activities.

Circle has also developed clear reserve management policies and emergency plans. For example, during the Silicon Valley Bank incident in March 2023, Circle had $3.3 billion in cash reserves that could not be withdrawn, leading to a temporary de-pegging of USDC. The company's management quickly issued a transparent announcement, promising to cover potential shortfalls with its own funds, and ultimately, with the Federal Reserve's intervention, the reserve assets were preserved, and USDC regained its peg. This incident highlighted the management team's capabilities in crisis response and risk communication, with timely and effective measures preventing user panic from spreading.

3.4 Compliance and Regulatory Relations

Since its inception, Circle has always placed a high emphasis on compliance operations, being hailed as a "model for embracing regulation." In 2015, Circle became the first holder of a BitLicense in New York, which is regarded as one of the most stringent state-level regulatory licenses in the digital currency industry, reflecting the company's high level of cooperation with compliance requirements.

Subsequently, Circle obtained money transmission licenses in 46 U.S. states, as well as electronic money institution licenses from the UK's Financial Conduct Authority (FCA) and exemption licenses from Singapore. The company invests significant resources each year to meet anti-money laundering (AML) and customer identity verification (KYC) requirements, with its internal compliance team implementing real-time monitoring of large and unusual transactions and promptly reporting suspicious behavior.

This compliance-first image gives Circle a stronger foundation of trust when communicating with regulators. CEO Jeremy Allaire has spoken multiple times at U.S. congressional hearings, supporting the establishment of federal-level stablecoin regulations and expressing a willingness to accept stricter oversight as a "litmus test" for the long-term healthy development of the industry.

In June 2025, after the U.S. Senate passed the stablecoin bill, Circle quickly initiated the application process for a federal trust bank license, striving to become one of the first compliant stablecoin issuers. It can be said that Circle's relationship with regulators is primarily cooperative, with management clearly recognizing that only by actively embracing regulation can they gain mainstream market recognition. This governance philosophy will help Circle maintain a leading position in future compliance competition and continuously shape a positive image with the government and the public.

4. Industry Analysis

4.1 Overview of the Global Stablecoin Market

Stablecoins are a type of cryptocurrency that anchors the value of fiat currencies or other assets, aiming to combine the price stability of fiat currencies with the efficiency of blockchain technology. They have become an important 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 $10 billion to nearly $200 billion in 2022. Although there was a short-term decline due to a correction in the cryptocurrency market, the total market capitalization of stablecoins has now surpassed $270 billion as the crypto market has warmed up again. As of July 2025, the supply of stablecoins accounts for over 1.2% of the U.S. M2 money supply (with a total M2 of $22.12 trillion), indicating a significant scale.

Currently, the stablecoin market is dominated by dollar-denominated products, which account for over 95%, while other currencies such as euro and pound stablecoins are still in the early stages of development. Among dollar stablecoins, USDT and USDC together hold about 85% of the market share, forming a dual oligopoly.

Stablecoin Circulation Volume Source: theblock

The demand for stablecoins mainly comes from the following aspects:

1. Demand for Crypto Trading

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 from BTC to stablecoins during the 2019-2021 cycle, with over 95% of spot trading volume coming from trading pairs composed of cryptocurrencies and stablecoins. In recent years, perpetual contracts based on stablecoins have also rapidly developed, with trading volumes several times that of spot trading, and their trading depth is comparable to that of spot. The promotion of perpetual contracts has further increased the penetration of stablecoins among traders.

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

2. Cross-Border Payments and Financial Inclusion

Stablecoins, with their advantages of fast cross-border transfers, low costs, and 24/7 availability, show significant potential in international remittances and trade settlements. Traditional remittances rely on multiple intermediaries, taking days and incurring high costs, while using stablecoins like USDC can achieve near real-time peer-to-peer settlements. Many payment service providers and remittance companies are actively piloting the integration of stablecoin networks, and traditional payment giants like Visa and Mastercard are closely monitoring the technological integration in this field.

3. DeFi and Digital Financial Applications

In the decentralized finance (DeFi) ecosystem, stablecoins serve as the foundational collateral and unit of account for lending, market-making, and derivatives protocols. Users can deposit stablecoins into DeFi platforms to earn interest or participate in liquidity mining, giving them deposit-like functionalities. During the DeFi boom in 2021, the on-chain lending demand for USDC surged, and Circle launched "Circle Yield" to provide fixed-income services for institutions. However, following the industry turmoil in 2022 (such as the collapse of the Terra algorithmic stablecoin), such yield businesses have shifted to a more cautious approach.

4. Macroeconomic Influences

Geopolitical and global financial trends are also driving the development of stablecoins. Despite the rising calls for "de-dollarization," stablecoins have objectively expanded the use of the dollar: due to their high convenience, many overseas markets prefer to hold USDC or USDT rather than local currencies, thereby reinforcing the actual influence of the dollar. According to ARK Invest analysis, the total amount of U.S. Treasury bonds held by stablecoins has surpassed that of countries like Germany and South Korea. Stablecoins are becoming important new buyers of U.S. Treasury bonds and new vehicles for the internationalization of the dollar, which to some extent consolidates the dollar's status as a reserve currency. Especially in emerging markets, high inflation and capital controls prompt residents to view stablecoins as alternatives to the dollar for daily payments and value storage. For example, in Argentina and Nigeria, USDT and USDC are widely used, forming a "parallel currency network" to compensate for the shortcomings of the local financial system.

Monthly Stablecoin Trading Volume Source: Grayscale

Additionally, it is worth mentioning that Google and Coinbase jointly launched the Agentic Payments Protocol 2 (AP2) on September 17, aimed at securely initiating and processing AI agent-led payments across platforms. AP2 introduces stablecoins as the primary payment method and is expected to promote the accelerated circulation of stablecoins in the short term. At the same time, the characteristic of stablecoins being tied to blockchain rather than human biometric information makes them inherently more suitable for economic activities between AI agents than other payment systems. Future economic activities between AI agents may also drive further expansion of the stablecoin market.

4.2 Competitive Landscape

The stablecoin market presents a "two super, many strong" competitive landscape: Tether (USDT) and Circle (USDC) rank first and second, respectively. Based on current issuance scales, USDT holds about 58% market share, while USDC accounts for about 25%. USDT is issued by the offshore company Tether, maintaining its dominant position due to its first-mover advantage and deep ties with multiple exchanges, but its operational transparency and compliance have long been questioned, with reserve disclosures and audits being a focus of concern for regulators in Europe and the U.S.

In contrast, Circle's USDC is known for its compliance and transparency, holding money transmission licenses in multiple U.S. states and a New York BitLicense. Circle proactively implements monthly audits, with reserve assets consisting of 100% cash and short-term U.S. Treasury bonds, most of which are placed in funds regulated by the U.S. This robust strategy significantly enhances institutional trust in USDC. As global regulations tighten, USDC is expected to further expand its share in markets with high compliance requirements (such as the U.S. and EU), while USDT may face constraints in certain jurisdictions (such as those restricted by the EU's MiCA regulations).

Other important competitors include:

• Payment Giants: PayPal launched the dollar stablecoin PYUSD in 2023, leveraging its vast user and merchant network to promote stablecoin payments. Currently, the circulation of PYUSD is 1.17 billion, still far smaller than USDC, but PayPal's brand and channel capabilities make its potential significant. Recently, Stripe also announced the launch of the stablecoin L1 Tempo, while Visa and Mastercard are positioning themselves in the stablecoin payment field through partnerships and investments.
• Financial Institutions: JPMorgan issues JPM Coin for inter-institutional settlements; Société Générale has launched a euro stablecoin. With the stablecoin bill successfully passed, more banks are expected to participate in the competition backed by their own credit, but their applications may focus on B2B scenarios such as corporate payments and on-chain settlements, with limited direct competition with USDC in the public market.
• Decentralized Stablecoins: Such as USDE from Ethena, DAI and USDS issued by MakerDAO. Based on issuance scale, USDE and USDS+DAI rank third and fourth among currently issued stablecoins (with issuance volumes of 13 billion and 9.5 billion, respectively), with USDE introducing cryptocurrency perpetual contract fee arbitrage into the stablecoin system, resulting in its stablecoin yields being significantly higher than short-term U.S. Treasury bonds, showcasing innovation and PMF. However, in terms of absolute scale and application scenarios, these stablecoins still have relatively small scale and influence, being used primarily as yield tools in users' minds, posing no significant threat to USDC in the short term.
• Other Compliant Issuers: Including USDP issued by Paxos, and BUSD, which was launched by Binance but ceased in 2023 due to regulatory pressure. Although institutions like Paxos hold U.S. trust licenses and have high compliance levels, their market promotion and ecosystem development still lag behind Circle. Since 2025, compliant stablecoin projects have rapidly emerged, such as USD1 launched by the Trump family (with circulation exceeding $2.5 billion), the governance token XPL of the Plasma project, which once had a pre-market valuation exceeding $7 billion, and USDTB, a fiat-backed stablecoin launched by Ethena (with circulation exceeding $1.6 billion), among others, with more small and medium-sized projects continuously entering the market.

In summary, Circle has established a certain first-mover advantage through the long-term accumulation of compliance capabilities and ecological cooperation with USDC. However, as the regulatory framework for stablecoins becomes increasingly clear and more participants join the competition, the market environment facing Circle is becoming more intense.

4.3 Regulatory Environment and Policies

The transition of stablecoins from "wild growth" to "regulation" is an inevitable trend. The Terra stablecoin incident in 2022 triggered global regulatory alerts, prompting countries to explore regulatory frameworks.

In July 2025, the U.S. Congress passed the "Guiding and Establishing the U.S. National Stablecoin Innovation Act" (GENIUS Act). This bill establishes a federal regulatory framework for payment stablecoins, which:

• Requires stablecoins to have 1:1 full reserves, limited to holding highly liquid assets (such as cash and short-term U.S. Treasury bonds);
• Requires issuers to publish monthly reserve composition reports and undergo independent audits or reviews, with reserves not to be misappropriated or re-pledged at will;
• Requires stablecoin issuers to establish sufficient capital and liquidity buffers and sound risk management to match business scale and risk conditions;
• Prohibits direct interest or yield payments to holders to avoid stablecoins being viewed as deposits or securities.

The bill explicitly excludes direct regulatory authority over payment stablecoins from securities and commodities regulators like the SEC and CFTC, with oversight jointly managed by banking regulatory agencies (such as the Federal Reserve, OCC, FDIC) and state financial regulatory agencies.

Overall, the GENIUS Act establishes the compliance baseline for stablecoins at the federal level in the U.S., clearly defining issuer qualifications, reserve asset transparency, and redemption obligations. The GENIUS Act will be fully implemented 18 months after its effective date (by the end of 2026), after which unapproved institutions will not be allowed to issue payment stablecoins in the U.S.

It is foreseeable that the GENIUS Act will eliminate poorly qualified issuers and promote a survival-of-the-fittest approach in the industry. For Circle, which already adheres to high compliance standards (holding money transmission licenses in 46 states, a New York BitLicense, and licenses in Bermuda and the UK), the new federal licensing threshold will further highlight its legal and compliance advantages, likely squeezing the market space of non-compliant competitors.

Outside the U.S., the European Union passed the MiCA Act in 2023, bringing stablecoins (referred to as electronic money tokens) under unified regulation, requiring licenses and compliance with reserve and capital requirements. Circle became the first global stablecoin issuer to comply with the MiCA framework in 2024, paving the way for its expansion into the European market. In Asia, international financial centers like Singapore and Hong Kong are also developing stablecoin licensing systems. The Hong Kong Monetary Authority issued recommendations at the end of 2023 to regulate stablecoin issuance and require a 1:1 reserve for Hong Kong dollar stablecoins. Japan has allowed the issuance of stablecoins regulated by trust companies. Overall, major jurisdictions are competing to introduce stablecoin regulations, aiming to attract related businesses while ensuring financial stability. This policy competition is beneficial for leading compliant operators. With its multi-regional licensing layout (such as the UK FCA electronic money license and Bermuda DABA digital asset business license), Circle is well-positioned to quickly enter compliant markets and seize opportunities in international expansion.

4.4 Industry Trend Outlook

In the coming years, there are several significant trends in the stablecoin industry worth noting:

Rapid Market Growth: Ark Invest predicts that by 2030, stablecoins could account for 0.9% of global M2, exceeding $14 trillion.

Although JPMorgan holds a conservative view on the "stablecoin market reaching $1 trillion by 2028," predicting only $500 billion, most institutions are more optimistic, believing that stablecoins are still in the early penetration stage and could achieve 5-10 times growth in the next five years. Especially as the regulatory framework becomes clearer, traditional financial institutions and markets may adopt stablecoins on a large scale for settlement and liquidity management, such as conducting pilot programs for securities settlement and alternatives in the treasury market. Standard Chartered even predicts that the stablecoin market could reach $2 trillion by 2028.

Shift from Trading to Payments and Commerce: Currently, about 94% of stablecoin demand still comes from crypto trading and DeFi scenarios, with only about 6% used for real-world payments and settlements. With the entry of payment companies like PayPal, the integration of networks like Visa, and the clarification of stablecoins' status as payment tools through legislation, the proportion of payment settlements is expected to gradually increase. Grayscale's research report refers to 2025 as the "Summer of Stablecoins," noting that major U.S. companies (like 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, achieving large-scale commercial payment applications.

Deep Integration with Traditional Finance: Stablecoins are gaining recognition from an increasing number of traditional financial institutions: giants like JPMorgan and Bank of America are participating in related investments or pilot programs; trading infrastructure provider DTCC is exploring the use of stablecoins to improve settlement efficiency; U.S. mortgage institutions are even beginning to consider including digital assets in borrowers' net worth. Stablecoins may become tools for banks' 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 purchasing U.S. Treasury bonds, suggesting that policymakers may gradually accept and support stablecoins as a "private sector supplement" to the U.S. financial system. It is foreseeable that stablecoin issuers may be integrated into payment systems (such as connecting to the Federal Reserve's FedNow real-time payment network), achieving seamless integration between traditional banks and on-chain digital dollars.

Technological Evolution and Multi-Chain Layout: Stablecoins will expand to more high-performance public chains and second-layer networks to meet different scenario needs. USDC is currently issued on more than 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 launched a Cross-Chain Transfer Protocol (CCTP) to facilitate the circulation of USDC across different chains. Looking ahead, Circle may issue more stablecoins (such as those for Asia-Pacific currencies) or support the integration of central bank-issued CBDCs into its network, further consolidating its position as a global digital currency circulation hub.

In summary, the stablecoin industry is transitioning from wild growth to a new phase of compliance competition. With its leading market share and compliance advantages, Circle is in a favorable position in this process. However, given the rapid changes in the industry, the company must continue to innovate and operate prudently to maintain growth in an environment filled with 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, experiencing a surge in supply during the DeFi wave in 2020 and the bull market in 2021. By the end of 2020, the circulation of USDC was approximately $4 billion, and by the end of 2021, it had surpassed $42 billion. Despite the market entering a bear phase in 2022, USDC circulation continued to grow to nearly $50 billion.

However, in March 2023, affected by the successive bankruptcies of crypto-friendly banks Silvergate and Signature, USDC faced a liquidity crisis, with redemption demand sharply increasing and a brief de-pegging occurring. Although the Circle team responded promptly and successfully completed all redemptions, the incident still caused USDC circulation to drop rapidly from 43 billion to 30 billion within a month.

From 2024 to 2025, driven by favorable regulatory policies and accelerated institutional adoption, USDC circulation gradually rebounded. By March 2025, its circulation had returned to a historical high of $60 billion. Subsequently, with the passage of the Stablecoin Act (GENIUS ACT), USDC circulation continued to reach new highs, exceeding 72 billion as of now.

In terms of users, the cumulative number of on-chain addresses exceeded 8.5 million in 2022, with monthly active addresses surpassing 1.1 million. By 2025, the average daily active addresses were about 280,000, with annual transaction counts increasing by 118%. The scale of on-chain transactions also significantly expanded: by mid-2025, the total on-chain transaction volume of USDC over the past 12 months was approximately $17.5 trillion, primarily from large transfers on exchanges and DeFi protocols. These data indicate that USDC has become one of the most widely used stablecoins in the blockchain ecosystem, with a solid user and ecological foundation.

Assets, Liabilities, and Cash Flow

Circle's balance sheet structure is relatively simple. The largest asset item is the investments corresponding to USDC reserves, which match the liabilities of USDC and are not included in shareholders' equity.

Excluding reserve assets, the company's own assets mainly consist of raised funds and retained earnings from previous years. After raising $1.05 billion in its 2025 IPO, according to the Q2 report, the company currently has cash reserves exceeding $1.1 billion. Additionally, Circle raised $455 million by issuing 3.5 million new shares at $130 per share on August 15, leaving the company with ample cash on hand. Circle has no interest-bearing debt in the long term, and its business model requires almost no leveraged financing (as reserve assets belong to user funds and are not classified as company loans).

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

Revenue and Profit Trends

Circle's revenue can be divided into interest income and non-interest income, with interest income (i.e., returns on USDC reserve investments) dominating.

Circle's business model essentially earns the interest margin between "user deposit costs" and "reserve investment returns," which is similar to banks, so changes in interest rates significantly impact Circle's revenue.

During the zero interest rate policy implemented by the Federal Reserve in 2020, Circle's total revenue was only $15.4 million, primarily from transaction and miscellaneous fees. Starting in the second half of 2021, as USDC supply expanded and interest rates rose, reserve interest became the core source of revenue, with annual revenue jumping to $84.9 million. In 2022, with interest rates rising rapidly (the year-end federal funds rate reached 4.5%) and USDC's average annual circulation doubling, the company's annual revenue surged to $772 million.

In 2023, as the Federal Reserve raised interest rates to over 5% and maintained high levels, Circle's annual revenue further doubled to approximately $1.43 billion. The total revenue for 2024 was $1.676 billion, a year-on-year increase of 15.6%, with growth slowing. In the first quarter of 2025, the company achieved revenue of approximately $579 million, setting a historical record. If this pace continues, the total revenue for 2025 is expected to exceed $2.3 billion, demonstrating strong profitability in a high-interest-rate environment.

Non-interest income (including API service fees, transaction fees, etc.) has consistently accounted for a low proportion, less than 1% of total revenue. This is because Circle has actively set the issuance and redemption of USDC as free to encourage ecosystem usage, not charging users minting fees. Although this strategy sacrifices some direct income, it has effectively promoted 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 in the short term, it remains at a low level.

The table below summarizes Circle's key performance data from 2020 to 2024 (all figures in hundreds of millions).

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

5.2 Key Drivers

The key drivers of Circle's financial metrics include USDC supply, short-term U.S. Treasury yield levels, and the proportion of distribution and transaction costs.

5.2.1 USDC Supply

The supply of USDC directly determines the scale of reserves held by Circle, which in turn affects its asset base for generating interest income. Circle's revenue is significantly positively correlated with USDC circulation. Changes in USDC supply primarily depend on the following two aspects:

(1) The overall prosperity of the stablecoin market:

The stablecoin market is thriving, and as the second-largest stablecoin, USDC's supply naturally rises. Currently, the main driving factors in the stablecoin market are the bull and bear cycles of cryptocurrency. During bull markets, crypto trading and DeFi activities are active, leading to increased demand for stablecoins and driving the expansion of USDC's supply; the opposite occurs in bear markets.

(2) The competitiveness of USDC itself:

If USDC has more significant advantages compared to other stablecoins, it will increase USDC's share of the total stablecoin supply, thereby boosting its supply. If Circle can maintain its advantages in compliance, transparency, and seize opportunities brought by regulatory policies to expand its applications in traditional financial scenarios, the supply scale of USDC is expected to further increase its share of the total stablecoin supply.

Trend of USDC Supply Source: theblock

Currently, the overall crypto market from 2023 to 2025 is in an upward channel, providing continuous growth momentum for stablecoins like USDC; demand from other areas such as payments is also steadily increasing, and the overall prosperity of the stablecoin market is expected to rise further. USDC's competitiveness is improving relative to its main competitor USDT as regulatory policies become clearer. Additionally, USDC has recently begun frequent collaborations with centralized exchanges, enhancing the willingness to hold USDC through operational means (such as providing interest to exchanges to indirectly return part of the reserve interest to users), which has also increased USDC's competitiveness. Both factors will drive an increase in USDC's supply.

5.2.2 Short-term U.S. Treasury Yield Levels

Short-term U.S. Treasury yields are another key variable determining Circle's interest income. From 2022 to 2023, the Federal Reserve's aggressive interest rate hikes raised rates to 5.25%, pushing Circle's effective average yield (after deducting some non-interest-bearing cash) to 2.68% in 2024. Excluding Coinbase's share, this yield corresponds to an overall return rate of about 5% on reserve assets, which is roughly in line with the three-month U.S. Treasury yield during the same period.

Trend of USD SOFR (Secured Overnight Financing Rate) Source

Comparing USDC supply, short-term interest rate levels, and Circle's revenue, we can also see that changes in interest rates are more pronounced than changes in USDC supply. Therefore, interest rate fluctuations have a more significant impact on Circle's operating revenue. For example, USDC's supply for the entire year of 2023 was considerably lower than in 2022, but Circle's revenue doubled compared to 2022 due to the rapid rise in interest rates. In 2024, USDC's supply is also much higher than in 2023, but due to declining interest rates, Circle's revenue only increased by 15% compared to 2023.

Looking ahead, there is some uncertainty regarding interest rate trends, but the market generally expects a shift to a rate-cutting cycle. According to ARK's report, if the Federal Reserve cuts rates by 2 percentage points to around 3% starting in 2025, Circle's annual interest income could decrease by about $631 million (based on 2024 data), turning a net profit of $156 million into a loss of $475 million. This indicates that declining interest rates significantly impact Circle's profitability. Conversely, if interest rates remain high or even rise further, Circle's profits will expand rapidly.

Currently, it is widely expected that the Federal Reserve will gradually lower rates to neutral levels (around 2-3%) in 2025-2026, which means that Circle's interest income growth may slow down or even see an absolute decline.

5.2.3 Distribution and Transaction Cost Proportion

Distribution and transaction costs are Circle's primary direct cost items. In 2024, these expenses reached $1.01 billion, accounting for 60% of the company's total revenue. Among these, the share paid to core partner Coinbase amounted to $908 million, representing 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.

1. Coinbase Revenue Sharing Mechanism

The vast majority of USDC distribution incentives flow to Coinbase, stemming from a long-term and complex partnership. The current cooperation agreement is effective from August 2023 to August 2026, with the possibility of renewal or adjustment after the term expires. The revenue-sharing mechanism can be summarized as follows: Coinbase first receives a net profit corresponding to the proportion of USDC it holds, and then receives 50% of the remaining net profit. Specific terms include:

• First, determine the payment base, which is based on the daily income generated by the reserves supporting USDC, after deducting third-party management fees (such as asset management and custody fees) and other related expenses.
• Circle retains a certain percentage of the income (annualized between approximately 0.08% and 0.2%, "low-double-digit basis point to high tenth of a basis point") to cover indirect costs of issuing stablecoins and managing reserves, such as accounting, finance, regulation, and compliance.
• Coinbase receives a daily share of the net profit based on the proportion of USDC it holds in custody or management. For example, if Coinbase holds 20% of USDC, it first receives 20% of the payment base.
• After deducting amounts payable to other approved participants (such as Binance, Bybit, etc.), Coinbase will also receive 50% of the remaining payment base.

Actual revenue-sharing situation:

• From 2022 to 2024, Coinbase's weighted average USDC custody ratios were 3%, 8%, and 18%, respectively.
• During the same period, Coinbase's revenue from Circle was $248.1 million, $691.3 million, and $907.9 million, accounting for the vast majority of distribution and transaction costs.
• From 2022 to 2024, Circle's reserve income was $735.9 million, $1.4306 billion, and $1.6611 billion, with Coinbase's share accounting for 33.7%, 48.32%, and 54.65%, respectively.
• Data from the first quarter and half of 2025 show that Coinbase held 7.594 billion and 7.275 billion USDC, accounting for 12.6% and 11.86% of the USDC circulation at that time, which is a decrease from the average level in 2024. It is expected that Coinbase's average custody ratio in 2025 will be between 11.8% and 12.3%, with its share of revenue from Circle's reserve income expected to remain at 50% to 53%.

2. Collaboration with Other Exchanges

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

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

For example, if the adjusted benchmark rate for the current quarter is 5%:

• If Binance holds 3 billion USDC (the agreed level), the incentive rate would be about 50% of the benchmark rate (mid-double-digit percentage), resulting in an annualized incentive rate of 2.5%. Circle would need to pay Binance approximately $75 million annually.
• If the holding increases to 4.8 billion, the incentive rate could reach 80% (higher double-digit percentage), with an annualized incentive rate of 4%, requiring Circle to pay approximately $216 million annually.

The agreement requires Binance to hold no less than 1.5 billion USDC, and typically it should be above 3 billion. In short, under this cooperation scheme, Binance can also share the reserve interest of USDC based on the proportion of USDC it holds in the total circulation, but unlike Coinbase, Binance cannot receive the full reserve interest; it can only obtain "mid-double-digit to higher 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, which has already far exceeded 3 billion, and it is expected to receive a share at a "higher double-digit percentage." In July 2025, Circle also reached a similar USDC revenue-sharing arrangement with Bybit, although specific details have not been disclosed.

Collaboration with exchanges has become a primary method for Circle to expand the circulation scale of USDC, incentivizing partners to hold and promote USDC by sharing part of the reserve interest. Currently, this strategy has shown significant effectiveness but has also led to a substantial diversion of Circle's interest income.

From a shareholder perspective, Circle can fully retain the interest income from USDC, primarily from the portion held by decentralized exchanges. This share of USDC circulation more directly impacts the company's EBITDA. Notably, the decentralized derivatives exchange Hyperliquid currently holds about 7.5% of the total USDC circulation, making it one of Circle's "favorite USDC holders." However, Hyperliquid has recently begun publicly soliciting a team to develop its own stablecoin, USDH, which may significantly affect its USDC holdings.

In summary, Circle's distribution and transaction costs may further increase in the future. We expect that in 2025, this cost will account for 60% to 63% of reserve income (the proportions for 2022-2024 and the first quarter of 2025 were 38.99%, 50.31%, 60.85%, and 60.08%, respectively). This will continue to squeeze Circle's profit margins and put pressure on the company's overall profitability.

On-chain Transaction Costs

On-chain transaction costs mainly include the gas fees, custody fees, and related expenses paid to underlying blockchain protocols incurred by Circle to support USDC's operation in a multi-chain environment. Although this portion of costs is relatively small compared to large interest-sharing payouts (usually a few percentage points of revenue), the specific amount is affected by blockchain network congestion, leading to some volatility. For example, during periods of congestion on main networks like Ethereum, large minting and burning operations of USDC require higher gas fees.

To address such expenditures, Circle holds approximately $31 million in crypto assets on its balance sheet specifically to cover on-chain transaction costs. Looking ahead, as Circle's own blockchain ARC gradually goes live and is promoted, on-chain transaction efficiency is expected to improve, and related costs are anticipated to decrease significantly.

Reserve Management Fees

Circle collaborates with BlackRock to manage USDC's reserve assets. According to the latest agreement, BlackRock is responsible for managing about 90% of USDC reserves and has committed to prioritizing support for Circle's stablecoin business. In return, BlackRock charges investment management and custody fees based on asset management scale, with an annual fee of approximately $100 million.

This fee is accounted for as a transaction cost in financial statements, effectively eroding some of the stablecoin asset's earnings, and is expected to account for about 6% of Circle's total revenue in 2024. If USDC's scale continues to expand while market interest rates enter a downward cycle, the management fees charged by BlackRock (calculated based on asset scale) may increase as the fees are accrued based on managed assets, while interest income is proportional to interest rates.

Overall, if the revenue-sharing rules between Circle and Coinbase remain unchanged after the renewal in 2026, we expect Circle's distribution and transaction costs to slowly rise from 60% of revenue in 2024 to remain in the range of 60% to 63% by 2028. This ratio carries some uncertainty: if Circle continues to incentivize expansion through partnerships with centralized exchanges, the cost ratio may remain high; conversely, increasing the proportion of direct users could help reduce costs.

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

5.2.4 Summary and Outlook

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

A decline in short-term U.S. dollar interest rates will directly lead to a reduction in Circle's interest income. In an extreme scenario, if the Federal Reserve reinstates the zero interest rate policy of 2020-2022, Circle's revenue based on the current business model would shrink significantly, forcing the company to seek other sources of income for sustainable operations.

Moreover, under the existing promotion strategy centered on exchange partnerships, an increase in USDC supply often accompanies a simultaneous rise in distribution costs. Even without considering interest rate changes, there may be a situation where "the growth rate of revenue is lower than the growth rate of USDC supply," 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 collaboration structures to control distribution costs, and actively respond to the challenges posed by the downward interest rate cycle.

5.3 Other Financial Matters

Since Circle has no long-term debt or complex derivative exposures, interest expenses and investment gains and losses have a limited impact on the company's profits. However, it is worth noting some of its strategic investments and crypto assets. For example, Circle has held a certain amount of Bitcoin, Ethereum, and other digital assets as liquidity reserves or long-term investments and has invested in several blockchain startups. The fluctuations in the fair value of these assets may lead to accounting gains or impairment impacts. For instance, during the significant downturn in the crypto market in 2022, Circle recognized tens of millions of dollars in digital asset impairment losses, resulting in negative other comprehensive income for that year. It should be noted that such gains and losses are primarily non-operating items, and when the overall crypto market rises, these assets are also expected to bring unexpected gains, enhancing the company's profits.

Additionally, as Circle progresses in its application for a banking license, if approved, the company may need to meet certain capital requirements and make corresponding provisions, which could have a slight impact on return on equity. On the other hand, under the federal regulatory framework, Circle may need to further isolate USDC reserve assets and may even incorporate part of the reserves into bank balance sheet management. The specific policy impacts remain to be clarified and are not yet included in financial forecasts.

6. Competitive Advantages and Moat

As one of the pioneers in the global stablecoin field, Circle's ability to succeed in competition and go public relies on its unique competitive advantages and the "moat" it has built. This is specifically reflected in the following aspects:

Compliance and Trust Advantage:

Circle's core moat lies in its strict compliance and the broad trust established as a result. In the stablecoin industry, users are highly sensitive to whether the issuer can maintain a 1:1 peg. Since the launch of USDC, Circle has consistently adhered to extremely high compliance standards, operating with a license, disclosing reserve status monthly, and undergoing audits by top accounting firms. This level of transparency far exceeds that of its main competitor Tether, which has faced market skepticism multiple times due to insufficient information disclosure.

Currently, Circle has obtained money transmission licenses in most U.S. states, a BitLicense in New York, and relevant licenses in several jurisdictions, including the UK and the EU, making it one of the few crypto companies globally to achieve compliance and licensing in multiple locations. The company has also applied for a national trust bank license in the U.S., which, if approved, will subject it to regulation similar to that of traditional banks. This series of compliance efforts has removed barriers for expanding large institutional clients (such as banks and publicly traded companies)—these institutions are more inclined to choose compliant, transparent, and regulated USDC rather than stablecoins issued by offshore entities with lower regulatory transparency.

It is foreseeable that as the regulatory framework for stablecoins in the U.S. and other countries becomes clearer, Circle will be among the first to obtain licenses 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 investments and a solid reputation. Trust itself is a form of "currency," and Circle's leading position in trust not only earns user loyalty but also ensures that USDC is viewed as a "safer haven" during market crises. For example, during the brief de-pegging of USDC in March 2023, most users still expected Circle to receive official support, based on the compliance reputation it has built over the years.

Technology and Product Advantage:

Although stablecoins themselves follow a simple 1:1 peg mechanism, the surrounding technological infrastructure and service ecosystem constitute significant competitive barriers. After years of accumulation, Circle has built a mature and reliable technological system in areas such as digital wallet custody, cross-chain transfer, and payment APIs.

For instance, Circle's Cross-Chain Transfer Protocol (CCTP) enables USDC cross-chain transfers without intermediaries through an atomic burn/mint mechanism. This protocol is technically challenging, but Circle has not only successfully implemented it but also made it open-source, allowing USDC to maintain uniformity and liquidity in a multi-chain environment while strengthening the industry ecosystem.

Additionally, Circle's payment API and enterprise account system are not merely simple interface services; they are comprehensive solutions that integrate KYC processes, fiat settlement, and compliance mechanisms, reflecting the team's deep integration and understanding of financial business and blockchain technology. Competitors wishing to provide services of equal quality must possess cross-domain technical capabilities and undergo long-term market validation. This "full-stack service capability" enables Circle to win enterprise clients as a solution provider—rather than just a token issuer—building an invisible product and technology moat.

Brand and Market Recognition:

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

For example, after PayPal launched its own stablecoin PYUSD, it still chose to support USDC within its ecosystem, reflecting that even competitors must acknowledge USDC's market position. Furthermore, Circle has received public recognition from top investment institutions, including BlackRock and ARK, further consolidating market confidence. This brand value cannot be rapidly acquired through short-term subsidies or capital investments; it relies on long-term accumulation and maintenance. Unless a significant trust crisis occurs, Circle's brand moat will continue to play a role in customer decision-making.

Ecosystem Network Effects

The stablecoin business has strong network effects, and currently, the stablecoin with the most pronounced network effect is still USDT, which serves as the largest settlement tool within centralized crypto exchanges, providing USDT with a solid moat. 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 mainstream cryptocurrency exchanges, wallet services, and DeFi protocols, becoming a fundamental liquidity component in the crypto ecosystem. Developers often prioritize integrating USDC when issuing tokens or launching new projects (especially on-chain projects), even over USDT, to leverage its broad user base, high liquidity, and compliance advantages. In this round of higher on-chain activity, the stablecoins on Solana, Base, and Hyperliquid chains are predominantly USDC (69.16%, 89.65%, and 95.15%, respectively). This widespread integration itself constitutes an industry barrier, as emerging stablecoins would need to invest significant time and resources to achieve comparable ecosystem penetration.

On the other hand, Circle continues to expand its partnership network through collaborations with internationally renowned institutions, creating a "flywheel effect." The company is advancing stablecoin payment applications in partnership with Visa and Mastercard, enabling offline exchanges with MoneyGram, and providing asset custody services in collaboration with BNY Mellon. These partners are typically large and resource-rich, and their support significantly expands the use cases for USDC. For example, Visa piloted the use of USDC for cross-border credit card settlements as early as 2021, marking the first time a stablecoin was integrated into traditional payment networks. As more giants join Circle's ecosystem, it becomes increasingly difficult for new entrants to gain support at the same level. The network effect makes scale itself a moat: the more users and applications USDC has, the greater its utility, attracting more users and creating a positive feedback loop.

Sustainability of the Moat:

Although the aforementioned advantages place Circle in a favorable position in the current competition, its moat is not impregnable and requires ongoing investment to maintain and expand:

1. Regulatory advantages may gradually become universal: As the industry regulatory framework matures and standardizes, compliance may shift from a differentiated advantage to an industry entry threshold. Once competitors are also fully compliant, Circle will need to maintain its lead through superior service and product experience.
2. Network effects need to be supported by application scenarios: If application expansion stagnates, newcomers may compete for users through incentive strategies (such as offering interest or lower rates). Although U.S. legislation prohibits 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 invested significant distribution costs in this area.
3. Technological leadership requires continuous investment: Blockchain technology evolves rapidly, and Circle must stay ahead in performance, security, and new features; otherwise, it may be surpassed by more agile competitors.
4. Brand reputation requires long-term maintenance: The company must resolutely avoid any events that could undermine trust, adhering to transparent operations and communication to maintain market confidence.

Overall, Circle's current moat is among the top tier in the stablecoin industry, strongly supporting its market position in the coming years. If it can successfully leverage its compliance advantages to expand into traditional finance, its moat will further widen, achieving a "rich get richer" Matthew effect. However, strategic missteps or poor management could weaken existing advantages. Therefore, Circle must continuously strengthen compliance efforts, deepen partnerships, maintain technological leadership, and uphold brand reputation to sustain its leadership position in the stablecoin normalization process.

7. Key Risks and Challenges

Interest Rate Dependency Risk

Circle's revenue structure is highly dependent on short-term U.S. dollar interest rates, with interest income accounting for as much as 99% of total revenue in 2024. This concentration means that if the U.S. enters a rate-cutting cycle, the company's revenue and profits will face a sharp decline risk. The market generally expects the Federal Reserve to begin cutting rates in 2025-2026; if so, Circle's profitability may significantly retreat from the 2024 peak.

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

Competition and Substitution Risk

Although Circle is a leader in the compliant stablecoin space, the dynamic evolution of the competitive landscape may still pose threats to its market share and growth:

• Existing competitors: Tether (USDT) still has a larger user base and deeper liquidity pools, dominating certain markets (especially in regions with lower compliance sensitivity). If it enhances operational transparency or adjusts its strategy, Circle may find it more challenging to capture market share.
• New entrants: PayPal has launched PYUSD and is steadily promoting it through its vast user and merchant network; several banks are also exploring issuing their own stablecoins. If these participants leverage their existing ecosystems for rapid penetration, they could erode Circle's application scenarios in payments.
• Emerging alternatives: Innovative products like Ethena USDe, which claim full compliance and are pegged to government bond yields, may attract users if they offer higher returns.
• Central Bank Digital Currencies (CBDCs): If the U.S. or EU launches official digital currencies and promotes their use through policy guidance, it could squeeze the market space for private stablecoins. While the industry generally believes that CBDCs and stablecoins will coexist, it is still necessary to be wary of structural shocks caused by policy bias.
• Technological disruption: New technological solutions like decentralized stablecoins could fundamentally challenge Circle's business model if they overcome the "price stability without fiat reserves" issue (although achieving this is currently extremely difficult).

In the face of these competitive challenges, Circle needs to continuously enhance product experience, deepen customer relationships, provide differentiated enterprise-level services, and actively monitor industry technological frontiers, adjusting strategic direction as necessary, such as proactively participating in CBDC ecosystem collaborations to maintain competitiveness in a changing market.

Policy and Regulatory Risk

The uncertainty of the regulatory environment has previously been a major risk for the entire stablecoin industry; however, after the successful legislation of the GENIUS Act in the U.S., this risk has significantly decreased, though there are still some variables in the specific implementation of the act. Nevertheless, the gradual implementation of regulations will inevitably increase Circle's compliance costs, thereby reducing its profit margins.

Changes in the political environment are also a concern. Currently, U.S. government policies are relatively business-friendly, but if there is a change in the ruling party (such as a potential Democratic government after 2028), policy direction may shift towards increased regulatory scrutiny, or even the introduction of CBDCs to squeeze the development space for private stablecoins. On an international level, some countries may implement restrictive policies on U.S. dollar stablecoins to maintain the status of their local currencies or financial stability. For instance, if major economies like the EU and India enact regulations limiting the use of USDC, it will directly impact Circle's globalization strategy.

Overall, the current regulatory situation for stablecoins represents the best historical period for Circle; any reversal in policy or significant tightening of regulations would directly impact its business expansion and market confidence. To address this, Circle needs to actively engage in policy communication, timely adjust compliance strategies, and diversify its layout (such as applying for banking licenses and exploring CBDC collaborations) to reduce dependence on a single policy environment.

Credit and Operational Risk

As a financial services company, Circle also faces various operational risks that could severely damage its credit and user confidence if they occur:

• Reserve asset risk: Although Circle allocates reserve assets to cash and short-term U.S. Treasury securities, in extreme scenarios (such as a liquidity crisis in the U.S. Treasury market or sovereign debt default), it may still face difficulties in asset liquidation or pressure to sell at a discount.
• Banking partner risk: Reserve assets are held in globally systemically important banks (GSIBs), which are relatively safe but not entirely risk-free (as seen in the 2023 Credit Suisse incident). If a partner bank encounters a crisis, it could temporarily freeze Circle's funds, triggering market panic.
• Technology and security risks: Issues such as hacking, smart contract vulnerabilities, and system failures could lead to fund losses or operational anomalies with USDC. Although Circle has a good security record, no system is completely immune to risks, and continuous investment is needed to ensure technological leadership and reliability.
• Compliance and internal control risks: Any lapses in areas such as anti-money laundering (AML) or sanctions compliance could lead to regulatory penalties and reputational damage; errors in financial disclosures or failures in internal controls could also affect market trust.

Circle has established redundant reserve mechanisms and emergency financing arrangements to enhance its risk resilience. However, due to the stablecoin business's high dependence on market confidence, a significant operational risk event could still trigger a run on the currency, necessitating that the company remain highly vigilant and continuously improve its risk control system.

Market Volatility and Macro Risk

Circle's business performance is highly correlated with fluctuations in the crypto market and the macro environment:

• Crypto market cycles: Significant market downturns (such as the Terra collapse in 2022) could lead to large-scale redemptions of stablecoins by users, resulting in a contraction of USDC supply and directly reducing the interest income base. Conversely, a bull market would lead to rapid scale expansion but also impose higher demands on operational management capabilities.
• Macroeconomic changes: If the U.S. economy falls into recession, a decline in investor risk appetite may reduce allocations to crypto assets and stablecoins; simultaneously, economic downturns typically accompany interest rate cuts, further compressing Circle's interest income.
• Changes in the dollar's status: Although stablecoins have expanded the international influence of the dollar at this stage, a rapid acceleration of "de-dollarization" trends could long-term impact the demand for dollar-denominated stablecoins.
• Exchange rate and inflation risks: A significant appreciation of the dollar could increase the cost for overseas users to use USDC; high inflation, while pushing up interest rates, could also suppress economic growth, negatively affecting payment activities.

Legal and Reputation Risk

As the company goes public and expands in scale, Circle may face more legal challenges, such as patent lawsuits and consumer class actions. Any negative public sentiment or disputes could damage its brand image. Especially as a publicly traded company, the market has higher expectations for its trustworthiness and transparency; if issues arise with USDC de-pegging or reserve disclosures, it could quickly impact market confidence.

Risk Management Outlook

To address the aforementioned risks, Circle has implemented several measures, including actively participating in regulatory communication, maintaining a high liquidity reserve policy, purchasing appropriate insurance, implementing real-time risk control monitoring systems, and establishing a board risk committee to strengthen governance. In the future, the company can enhance its overall risk resilience by promoting business diversification (such as issuing multi-currency stablecoins and expanding non-interest income), entering multiple regional markets, and increasing technological investment and compliance efforts. Additionally, sufficient capital (from the IPO and retained earnings) provides an important buffer for the company to respond to potential shocks.

8. Stock Lock-up and Unlocking Situation

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

Percentage is based on 227.6 million "issued and outstanding common shares (including Class A 207.6 M + Class B 20.0 M)" as the denominator, not accounting for potential future issuances under fully diluted conditions (unallocated RSUs, option pools, etc. ≈ 25–30 M).

Unlocking Schedule

Regarding the unlocking schedule, the original prospectus stipulates the following: "All locked shares may be sold 180 days after the date of this prospectus, or on the second trading day after the company submits its Q3 2025 report to the SEC and publicly discloses its performance (whichever is earlier)."

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

Since the vast majority of U.S. public companies report their Q3 earnings in mid-November, it is highly likely that the unlocking time for the aforementioned restricted shares will be "the T+2 trading days after the company submits its Q3 2025 Form 10-Q (or news release/conference call simultaneously)," with the latest date being December 1.

For example, if Circle announces its Q3 results after the market closes on November 13, 2025 (Thursday):

T+1 = November 14 (Friday)

T+2 = November 17 (Monday)

→ Unlocking effective: November 17, 2025

On August 15, 2025, Circle publicly issued shares at $130 per share, planning to issue 2 million new shares and sell 8 million shares from existing shareholders. Ultimately, under the green shoe mechanism, it successfully issued 3.5 million new shares, and existing shareholders also successfully sold 8 million shares.

Currently, information on shareholders holding over 2% of shares, including their selling information on August 15, is summarized as follows:

It can be seen that the majority of shareholders holding over 2% have a cost basis below $10 and have invested for over 10 years. After the unlocking in November, there is likely to be strong demand for cashing out, which may put more pressure on Circle's stock price.

9. Valuation

9.1 Current Valuation Level

IPO and Current Market Value:

Circle successfully went public on the New York Stock Exchange on June 5, 2025, with an issue price set at $31 per share, raising approximately $1.05 billion, corresponding to a market value of about $6.9 billion at the time of the IPO. On the first day of trading, market enthusiasm was high, with the stock price opening at $69 and closing at $83.23, an increase of about 168% from the issue price. In the following weeks, Circle's stock price continued to soar, reaching nearly $299 intraday on June 23, 2025, an increase of over 860% from the issue price. This price corresponds to a fully diluted market value of over $83 billion, reflecting the market's fervent expectations for the stablecoin business.

As market sentiment cooled, Circle's stock price significantly retraced in the following months. As of the close on September 15, 2025, Circle's stock price had fallen to $134.05. Based on an estimated total share capital of approximately 232 million shares (including the newly issued shares on August 15, but excluding potential future equity incentives), the current stock price corresponds to a fully diluted market value of about $31.1 billion. This latest valuation still reflects the market's strong expectations for Circle's future growth.

Valuation Multiple Levels:

• Static valuation level: Based on the full-year performance for 2024 (revenue of approximately $1.68 billion, net profit of only about $156 million), a market value of $31.1 billion implies a price-to-earnings (P/E) ratio of about 199 times and a price-to-sales (P/S) ratio of about 18.5 times. Such high multiples far exceed the average valuation levels of traditional financial and technology companies. Circle has just achieved full-year profitability in 2024 with a low net profit base, making it difficult to support such high valuation multiples.
• Forward valuation level: According to the latest Q2 earnings report data, Circle's revenue and adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) both experienced significant growth, with year-on-year increases of 53% and 52%, respectively. However, due to $591 million in non-cash expenses related to the IPO (mainly including $424 million in stock-based compensation), Circle's net profit for the year is likely to be negative. Considering performance growth factors, assuming an optimistic scenario where revenue increases by 58% in 2025 to reach $2.66 billion, the current stock price corresponds to a forward P/S ratio of approximately 11.7 times. This indicates that the market is giving Circle a very high premium, primarily viewing it as a scarce crypto financial infrastructure asset, betting on its long-term profit explosion potential and the large-scale growth of its future stablecoin business. The high valuation also means that investors have already preemptively discounted a significant portion of the company's future growth expectations, making short-term stock price volatility and correction risks non-negligible.

9.2 Comparable Company Valuation Comparison

There are no companies in the public market that can be fully compared to Circle, which is a major reason why Circle currently enjoys a scarcity valuation premium. We selected some relevant industry companies as references:

• Coinbase (COIN): As a crypto exchange, its business model differs from Circle's, but it is similarly affected by the crypto industry's prosperity.
• Visa and Mastercard: As traditional payment giants, their expected P/E for 2025 is in the range of 25-30 times, representing the valuation level of mature payment networks (with a net profit margin of around 50% year-round). With an almost monopolistic position and robust performance, Visa and Mastercard have long enjoyed high and stable valuation premiums. However, although Circle is in the payment ecosystem, it does not currently charge commissions based on transaction volume like Visa and Mastercard, making it not a perfect comparable entity.
• U.S. banking industry: Circle's actual business is interest margin income, similar to banks. Looking at the average level of U.S. banks, the current P/E is generally below 10 times, and the P/S is around 1 time, reflecting that traditional financial institutions grow slowly and have stable profits but lack high valuation imagination.

We used P/E, P/S, EV/Revenue, and EV/EBITDA metrics to conduct a multi-dimensional comparison of Circle with Coinbase, PayPal, Visa, Mastercard, and traditional U.S. banks, resulting in the following data:

Notes on scope and calculations: Market value and stock price are based on the close on September 15, 2025.

* Considering that Circle's profit data for 2025 is affected by IPO expenses, Circle's net profit margin and corresponding P/E data are taken from Q2 2024 to Q1 2025, while its EBITDA is taken from the adjusted rolling EBITDA (adjusted EBITDA-TTM). The other stocks use the latest rolling data (Q3 2024 to Q2 2025). Circle's actual rolling net profit for the most recent 12 months is negative.

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

9.3 Scenario Analysis

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

Pessimistic Scenario:

Assuming that stablecoin regulation resurfaces; at the same time, the global economy slows down, and the Federal Reserve significantly cuts interest rates to near 0% from 2026 to 2028, with short-term rates averaging only about 1%. In this environment, competition intensifies, with traditional payment players like PayPal encroaching on the market, leading to a slowdown in USDC growth and a decline in market share.

Key assumptions:

• By 2028, the circulation of USDC reaches only about $80 billion (annual growth rate below 5%);
• Circle's average yield on reserves is only 1.0% (with rates close to zero for most of the time);
• Coinbase's interest sharing remains at 50%, distribution costs remain around 60%, and net profit margin maintains around 10% as in 2024.

Financial impact:

• It is expected that Circle's revenue in 2028 will be about $800 million, significantly down from 2024;
• Due to rigid growth in operating costs, net profit may approach breakeven or only achieve a small profit of $0-100 million.

Valuation projection:

• In this scenario of performance regression, the market may assign a P/E valuation multiple of only about 20 times, corresponding to a market value of about $2 billion in 2028, less than 10% of the current market value. Even considering a certain degree of growth premium, the valuation in the pessimistic scenario is still far below the current level. This means that if this scenario occurs, Circle's stock price may drop significantly, which is an extreme downside situation that investors need to be wary of.

Baseline Scenario:

Assuming Circle successfully obtains a federal trust license, with USDC maintaining steady growth under compliance support. On the macro front, the U.S. economy achieves a soft landing, and the interest rate environment gradually returns to neutral levels from 2025 to 2028 (with short-term rates around 2.5%). In terms of competition, USDC maintains its position as a major stablecoin due to its compliance advantages, with a slight increase in market share.

Key assumptions:

• By 2028, the circulation of USDC reaches about $150 billion (with a compound growth rate of about 25% from 2025 to 2028);
• Circle's average yield on reserves is about 2%;
• Scale effects improve, allowing the net profit margin to rise to 15%.

Financial impact:

• It is expected that Circle's revenue in 2028 will be about $3 billion;
• Net profit is expected to be about $450 million, growing about 3 times from 2024.

Valuation projection:

• Assuming that the market grants a growth company a P/E valuation of about 25× in 2028, the corresponding market value would be approximately $10 billion. This is far lower than Circle's current market value of $31.1 billion—indicating that the current valuation remains high under the baseline scenario, suggesting that the market pricing has implied more optimistic expectations than "steady growth." Of course, from another perspective: if we look back from 2028, Circle's revenue and profits may have significantly increased, and even if the valuation multiple compresses substantially compared to the current level, the market value could still rise compared to 2025. However, based on the current stock price, the baseline scenario is insufficient to support its $31.1 billion valuation, implying that before the company's performance significantly exceeds baseline expectations, the stock price may lack explosive momentum in the short to medium term.

Optimistic Scenario:

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

Key assumptions:

• By 2028, the circulation of USDC surges to about $300 billion (with a compound annual growth rate of about 40%);
• Circle's actual average yield on reserves is about 2.5%;
• The interest-sharing ratio with Coinbase is slightly reduced to 40% after renegotiation, while scale effects improve, raising the net profit margin to 20%.

Financial impact:

• It is expected that Circle's revenue in 2028 will reach approximately $7.5 billion;
• Net profit is expected to be around $1.5 billion.

Valuation projection:

• If the market is willing to grant high-growth companies a P/E valuation of around 30× at that time, Circle's market value could reach about $45 billion. Currently, Circle's market value is close to $30 billion, indicating a potential increase of about 50% to reach this optimistic valuation. This suggests that the current market pricing is roughly between the baseline and optimistic scenarios. If the optimistic scenario materializes, buying at the current price may not be considered "cheap," but long-term holding should not result in losses; furthermore, the explosive growth in Circle's earnings from 2025 to 2028 will quickly absorb the high valuation, and by 2028, Circle's P/E will likely revert to a reasonable level of around 30×. In other words, buying and holding in the optimistic scenario, investors can expect decent medium to long-term returns.

Scenario Analysis Summary:

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

Conclusion:

Circle's current valuation level is significantly higher than comparable companies. Compared to Coinbase, Circle has a smaller profit scale but a higher revenue multiple; compared to payment giants like Visa and Mastercard, its business model has yet to be validated over the long term, but its price-to-sales ratio is already close to theirs. This valuation misalignment primarily stems from the market's optimistic expectations for Circle's future development.

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

In summary, only when investors firmly believe that the stablecoin ecosystem will experience explosive growth and that Circle can continue to expand its business landscape does the current valuation hold medium to long-term rationality. Otherwise, they should be wary of the downside risks arising from a disconnect between valuation and fundamentals.

10 Investment Recommendations and Conclusions

Based on the above analysis, we can draw a comprehensive judgment on Circle's valuation and investment:

Scarcity in the Stablecoin Industry: The stablecoin industry, where Circle operates, is in a period of rapid development. The gradual clarification of the U.S. regulatory framework further strengthens the long-term certainty of the industry's development, attracting several giants to accelerate their layout. Although increasing competition poses certain pressures on Circle, it also confirms the market's recognition of the long-term value of the stablecoin sector. Circle currently holds the second-largest market share in the stablecoin market and is the only publicly traded entity available for investment, making this scarcity an important consideration for investors' decisions.

Valuation Implies High Growth Expectations: From multiple valuation metrics, Circle's current valuation level is high, reflecting that the market has already priced in its growth prospects quite fully, and some valuation logic has even referenced its future position as a leader in financial infrastructure. Future stock price movements will heavily depend on whether the company's actual performance matches or exceeds market expectations. If quarterly financial performance or key operational metrics fall short of optimistic expectations, it may trigger a valuation correction.

Medium-term Financial Performance Faces Pressure: Circle's financial performance primarily depends on three major driving factors: the supply of USDC is expected to continue growing with industry expansion and operational optimization, but in the short term, U.S. Treasury yields are entering a downward cycle, coupled with high distribution and transaction costs, which are expected to put pressure on its revenue and profit margins for some time.

Massive Unlocking in November-December: Shares from early investors will be unlocked in a concentrated manner in November-December, with the vast majority of investment periods nearing or exceeding ten years, leading to 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 may impact Circle's valuation:

• Obtaining a banking license – If Circle receives OCC approval for a trust license, it will become the first stablecoin bank in the U.S., significantly increasing its status and trustworthiness, potentially triggering a revaluation.
• Progress in Business Diversification – If Circle announces new revenue sources (such as launching payment fee schemes) that exceed market expectations, it will improve the perception of interest dependency and boost valuation.
• Mergers and Collaborations – Any deepening cooperation with large banks/technology companies or potential mergers (such as being acquired by a larger financial institution) will influence the market's judgment of its ultimate value.
• Conversely, negative catalysts such as sudden interest rate cuts by the Federal Reserve, competitors launching stablecoins, or security incidents will suppress valuation.

Investment Recommendation:

Based on the above, we lean towards a "Neutral" stance on Circle's stock. The reason is that although Circle has a bright long-term outlook, the current price has fully or even prematurely reflected optimistic expectations, resulting in a low margin of safety in valuation. Considering the existing uncertainties in the macro and industry environments, the short-term volatility risk is high.

Long-term Outlook:

If we extend the time horizon to 2030 or beyond, Circle has the potential to grow into a highly influential global fintech giant. By then, Circle may not only issue USDC but also possess banking functions and operate a multi-currency stablecoin network, with revenue sources expanding from interest to payment fees, financial intermediary services, and other diverse areas, significantly enhancing profit scale and stability. At that time, the seemingly excessive valuation multiples today may be absorbed by rapid growth, and Circle could become a stable and highly profitable payment company like Visa or PayPal, but operating on blockchain technology. To achieve this vision, the company needs to navigate through numerous policy and competitive challenges successfully.

In summary, Circle represents the trend of integration between crypto finance and traditional finance, and its investment value depends on investors' judgments about the speed and depth of this trend's evolution.

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