This article traces Circle’s seven-year journey to going public, examining its corporate governance, business structure, and profit model to uncover the growth potential and capitalization logic behind its “low net margins.”

At a time when the industry is accelerating its consolidation, Circle’s decision to go public tells a seemingly contradictory yet compelling story—declining net margins but immense growth potential. On one hand, it boasts high transparency, strong regulatory compliance, and stable reserve income. On the other, its profitability appears surprisingly “modest,” with a 2024 net margin of just 9.3%. This superficial “inefficiency” does not stem from a flawed business model but rather reveals a deeper growth strategy: as high-interest-rate benefits fade and distribution costs grow more complex, Circle is building a highly scalable, compliance-first stablecoin infrastructure, strategically reinvesting profits into market share expansion and regulatory leverage.

Using Circle’s seven-year IPO journey as a framework, this article will analyze its growth potential and capitalization logic behind these low net margins, covering corporate governance, business structure, and profitability models.

1. A Seven-Year IPO Marathon: A History of Crypto Regulation Evolution

1.1 Three Capitalization Attempts and Paradigm Shifts (2018-2025)

Circle’s IPO journey can be seen as a living case study of the dynamic game between crypto companies and regulatory frameworks. The initial IPO attempt in 2018 occurred during a period when the U.S. Securities and Exchange Commission (SEC) had an ambiguous stance on the classification of crypto assets. At that time, the company established a “payments + trading” dual-engine model by acquiring the Poloniex exchange and secured $110 million in financing from investors such as Bitmain, IDG Capital, and Breyer Capital. However, questions from regulators regarding the compliance of the exchange business, coupled with a sudden bear market, caused its valuation to plummet from $3 billion by 75% to $750 million, exposing the fragility of early crypto business models.

The 2021 SPAC attempt reflected the limitations of regulatory arbitrage thinking. Although merging with Concord Acquisition Corp allowed the company to bypass the strict scrutiny of a traditional IPO, the SEC’s inquiries into the accounting treatment of stablecoins hit a critical nerve — requiring Circle to prove that USDC should not be classified as a security. This regulatory challenge caused the deal to fall through, but it unexpectedly propelled a critical transformation: divesting non-core assets (such as selling Poloniex for $150 million to an investment group), and establishing a strategic focus on “Stablecoin-as-a-Service.” From that moment to today, Circle has been fully committed to building USDC compliance and actively applying for regulatory licenses in multiple countries globally.

The IPO decision in 2025 marks the maturity of the crypto industry’s path to capitalization. Listing on the New York Stock Exchange not only requires full disclosure in accordance with Regulation S-K, but also mandates internal control audits under the Sarbanes-Oxley Act. Of particular interest is that the S-1 filing disclosed for the first time the reserve fund management mechanism: of approximately $32 billion in assets, 85% are allocated to overnight reverse repurchase agreements through BlackRock’s Circle Reserve Fund, while 15% are deposited with systemically important financial institutions such as BNY Mellon. This transparent operation essentially builds an equivalent regulatory framework to traditional money market funds.

1.2 Cooperation with Coinbase: From Ecosystem Co-Construction to Subtle Relationship Dynamics

As early as the launch of USDC, the two companies had partnered through the Centre Consortium. When Centre was founded in 2018, Coinbase held 50% equity and quickly opened the market through a model of “technical output in exchange for traffic access.” According to Circle’s 2023 IPO filing, it repurchased the remaining 50% of Centre Consortium equity from Coinbase with $210 million in stock, and the profit-sharing agreement concerning USDC was also renegotiated.

The current profit-sharing agreement reflects a dynamic game. According to the S-1 filing, the two parties share income from USDC reserves based on a certain ratio (with the document mentioning that Coinbase shares about 50% of the reserve income), and the profit-sharing ratio is linked to the amount of USDC supplied by Coinbase. Public data from Coinbase shows that in 2024, the platform held about 20% of the total circulating USDC. With a 20% supply share, Coinbase took about 55% of the reserve income, planting potential issues for Circle: as USDC expands outside of Coinbase’s ecosystem, the marginal cost will rise non-linearly.

2 USDC Reserve Management and Equity & Shareholding Structure

2.1 Layered Reserve Management

USDC reserve management shows an obvious “liquidity layering” feature:

• Cash (15%): Held at GSIBs such as BNY Mellon, used to respond to unexpected redemptions
• Reserve Fund (85%): Allocated through BlackRock-managed Circle Reserve Fund

Since 2023, USDC reserves have been limited to cash balances in bank accounts and the Circle Reserve Fund. The fund’s asset portfolio mainly includes U.S. Treasury securities with remaining maturities of no more than three months and overnight U.S. Treasury repurchase agreements. The portfolio’s dollar-weighted average maturity does not exceed 60 days, and the dollar-weighted average duration does not exceed 120 days.

2.2 Share Classes and Layered Governance

According to the S-1 filed with the SEC, after listing, Circle will adopt a three-tier share structure:

• Class A shares: Common stock issued during the IPO, each share has one voting right
• Class B shares: Held by co-founders Jeremy Allaire and Patrick Sean Neville, each share carries five voting rights, but the total voting rights are capped at 30%, ensuring that even post-IPO, the core founding team retains leadership over decision-making
• Class C shares: Non-voting shares, convertible under certain conditions, ensuring compliance with NYSE governance rules

This shareholding structure is designed to balance public market financing with long-term strategic stability of the company, while preserving executive control over key decisions.

2.3 Executive and Institutional Shareholding Distribution

According to the S-1 filing, the executive team holds a significant amount of shares. At the same time, many well-known venture capital and institutional investors — such as General Catalyst, IDG Capital, Breyer Capital, Accel, Oak Investment Partners, and Fidelity — each hold more than 5% of equity. These institutions collectively hold over 130 million shares. The $5 billion valuation of the IPO is expected to bring them substantial returns.

3 Profit Model and Revenue Breakdown

3.1 Revenue Model and Operational Metrics

• Revenue Sources: Reserve income is Circle’s core revenue source. Each USDC token is backed 1:1 by U.S. dollars, and the reserve assets are primarily short-term U.S. Treasury securities and repurchase agreements, generating stable interest income in a high-interest environment. According to the S-1 filing, total revenue in 2024 reached $1.68 billion, of which 99% (approximately $1.661 billion) came from reserve income.
• Revenue Sharing with Partners: The cooperation agreement with Coinbase stipulates that Coinbase receives 50% of reserve income based on the amount of USDC it holds. This significantly reduces Circle’s actual retained income and drags down net profit performance. Although this revenue split impacts profitability, it’s a necessary cost for building the ecosystem and driving widespread adoption of USDC.
• Other Income: In addition to interest income from reserves, Circle also earns revenue from enterprise services, USDC minting services, and cross-chain transaction fees. However, these contributions are small, totaling only $15.16 million.

3.2 The Paradox of Revenue Growth and Profit Margin Compression (2022–2024)

Underlying Structural Drivers Behind the Surface Contradiction:

• From Diversification to Single-Core Focus: From 2022 to 2024, Circle’s total revenue increased from $772 million to $1.676 billion, with a compound annual growth rate (CAGR) of 47.5%. Reserve income became the company’s most crucial revenue source, rising from 95.3% of total income in 2022 to 99.1% in 2024. This increased concentration reflects the success of its “Stablecoin-as-a-Service” strategy but also indicates a growing dependence on macro interest rate changes.
• Surging Distribution Costs Compress Gross Margin: Circle’s distribution and transaction costs surged from $287 million in 2022 to $1.01 billion in 2024, a 253% increase. These costs are mainly associated with USDC issuance, redemption, and payment settlement systems. As USDC’s circulation grows, these expenses rise rigidly. \
  Since such costs are not easily compressible, Circle’s gross margin dropped rapidly from 62.8% in 2022 to 39.7% in 2024. This reflects a structural risk in Circle’s B2B stablecoin model — while it has scale advantages, it may face profitability pressure in a declining interest rate cycle.
• Turning Profitable but Slower Marginal Growth: Circle became profitable in 2023, achieving net income of $268 million and a net margin of 18.45%. While profitability continued in 2024, after deducting operational costs and taxes, distributable income was only $101.25 million. Adding $54.42 million in non-operating income, the net profit was $155 million — but net margin fell to 9.28%, nearly halving year-on-year.
• Rigid Costs: Notably, in 2024, general and administrative (G&A) spending reached $137 million, a year-on-year increase of 37.1%, marking three consecutive years of growth. According to S-1 disclosures, these costs are mainly related to global license applications, audits, and legal compliance team expansions, confirming that the “compliance-first” strategy has brought structural cost rigidity.

Overall, Circle completely moved away from the “exchange narrative” in 2022, reached a profitability inflection point in 2023, and maintained profitability in 2024 though with slower growth. Its financial structure is increasingly aligning with that of traditional financial institutions.

However, its revenue structure — highly reliant on U.S. Treasury interest spreads and transaction volume — means that if interest rates fall or USDC growth slows, profit performance will be directly impacted. To maintain sustainable profitability, Circle will need to strike a more balanced path between “cost reduction” and “growth expansion.”

Deeper Issue: Business Model Flaw

As USDC becomes more of a “cross-chain asset” (with $20 trillion in on-chain transaction volume in 2024), its monetary multiplier effect weakens, which ironically reduces the issuer’s profitability. This mirrors traditional banking challenges.

3.3 Growth Potential Behind Low Net Margin

Although Circle’s net profit margin continues to be pressured by high distribution costs and compliance spending (with 2024 net margin at only 9.3%, down 42% YoY), its business model and financial data still conceal several growth drivers:

• Continued Circulation Growth Drives Stable Reserve Income: According to CryptoQuant, as of early April 2025, USDC’s market cap exceeded $60 billion, second only to USDT’s $144.4 billion. By the end of 2024, USDC’s market share had risen to 26%. In 2025, USDC market cap has already grown by $16 billion. Considering it was under $1 billion in 2020, its CAGR from 2020 to April 2025 is 89.7%. Even if growth slows in the remaining eight months of 2025, USDC’s market cap could still reach $90 billion by year-end, pushing the CAGR to 160.5%. While reserve income is sensitive to interest rates, lower interest rates could stimulate USDC demand, and robust scale expansion can partially offset risks from declining rates.
• Structural Optimization of Distribution Costs: Despite paying high revenue shares to Coinbase in 2024, this cost does not scale linearly with circulation. For example, a one-time $60.25 million payment to Binance boosted its platform’s USDC supply from $1 billion to $4 billion — achieving significantly lower customer acquisition costs than with Coinbase. Combined with information in the S-1, the Circle-Binance partnership suggests Circle may achieve market cap growth at lower cost going forward.
• Conservative Valuation Undervalues Market Rarity: Circle’s IPO valuation of $4–5 billion implies a P/E ratio of 20–25x based on adjusted net profit of $200 million, comparable to traditional payment companies like PayPal (19x) and Square (22x). This suggests the market views it as a “low-growth, stable-profit” business. However, this valuation does not fully price in its rarity as the only pure-play stablecoin issuer listed in U.S. equity markets. Companies in niche sectors often command a valuation premium — a factor Circle hasn’t fully leveraged. Additionally, if stablecoin legislation is enacted, offshore issuers may need to overhaul reserve structures, while Circle’s existing compliance framework can seamlessly transition, creating a “regulatory arbitrage windfall.” This could lead to significant USDC market share gains.
• Stablecoin Market Cap Shows Resilience Compared to Bitcoin: Stablecoin market caps tend to remain stable even when Bitcoin prices drop sharply, showing their unique advantage in volatile crypto markets. During bear markets, investors often seek safe-haven assets, and the stability of stablecoin growth makes Circle a potential “safe harbor” for capital. Compared to companies like Coinbase or MicroStrategy that rely heavily on market trends, Circle — as the main issuer of USDC — bases its revenue more on stablecoin transaction volume and reserve asset interest income, rather than direct exposure to crypto asset price fluctuations. Thus, Circle has stronger bear market resistance and more stable profitability. This makes it a potential hedging asset in investment portfolios, especially during turbulent markets.

4 Risks — Upheaval in the Stablecoin Market

4.1 Institutional Network Is No Longer a Strong Moat

• Interest Binding as a Double-Edged Sword: Although Coinbase takes 55% of the reserve income, it only holds 20% of the USDC share. This asymmetric revenue split originates from a legacy agreement from the 2018 Centre consortium, which effectively results in Circle paying $0.55 in cost for every $1 of new income — significantly higher than the industry average.
• Ecosystem Lock-In Risk: The prepaid agreement signed with Binance exposes the imbalance in distribution channel control. If major exchanges collectively demand to renegotiate terms, it may trigger a vicious cycle of “spiraling distribution costs.”

4.2 Dual Impact of Stablecoin Legislation Progress

• Pressure to Localize Reserve Assets: The proposed legislation requires issuers to hold 100% reserves (cash and cash equivalents), and to prioritize using U.S. federally or state-chartered depository institutions as custodians. Currently, only 15% of Circle’s cash is stored in domestic institutions such as BNY Mellon. Regulatory adjustments may result in hundreds of millions of dollars in one-time capital relocation costs.

5 Strategic Reflections — A Breakthrough Window for Disruptors

5.1 Core Advantage: Strategic Positioning in a Compliance Era

• Dual Regulatory Network: Circle has built a regulatory matrix covering the U.S., Europe, and Japan — a form of institutional capital that is difficult for traditional companies like PayPal to replicate. Once the “Payment Stablecoin Act” is implemented, the proportion of compliance costs to revenue is expected to drop significantly, forming a structural advantage.
• Cross-Border Payment Substitution Wave: Through its partnership with Wise, Circle has launched “instant USDC settlement” services, which have greatly reduced corporate cross-border payment costs. If it captures a portion of SWIFT’s annual settlement volume, it could bring in considerable new circulation volume, fully offsetting the impact of declining interest rates.
• B2B Financial Infrastructure: Within Stripe’s e-commerce payment system, the proportion of USDC settlements has significantly increased. Its automatic fiat currency conversion protocol can help companies save greatly on foreign exchange hedging costs. The expansion of such “embedded finance” scenarios is enabling USDC to evolve beyond a mere transaction medium and toward a store-of-value function.

5.2 Growth Flywheel: The Game Between Interest Rate Cycles and Economies of Scale

• Emerging Market Currency Replacement: In regions with high inflation, USDC has already captured a portion of the market for U.S. dollar foreign exchange transactions. If Fed rate cuts lead to accelerated depreciation of local currencies, this “digital dollarization” process may significantly boost circulation growth.
• Offshore Dollar Repatriation Channel: Through partnerships with BlackRock to explore tokenized asset projects, Circle is converting some offshore U.S. dollar deposits into on-chain assets. This “capital pipeline” value is not yet reflected in current valuations.
• RWA (Real World Assets) Tokenization: After acquiring relevant tech companies, Circle has launched tokenized asset services that have reached initial AUM (Assets Under Management), generating considerable annualized management fee income.
• Interest Rate Buffer Period: With the federal funds rate still at a high level, Circle must push its circulation volume past a critical threshold through accelerated globalization before the rate cut expectations are fully priced in, so that scale effects can offset the impact of interest rate decline.
• Regulatory Window Period: Before the “Payment Stablecoin Act” is fully implemented, Circle should leverage its current compliance advantage to capture institutional clients, and sign exclusive settlement agreements with top hedge funds — building exit barriers.
• Deepening the Enterprise Services Suite: By packaging its compliance APIs and on-chain audit tools into a “Web3 Financial Services Cloud,” Circle can charge traditional banks SaaS subscription fees, opening up a second revenue curve beyond reserve income.

Underneath Circle’s low net margin lies a deliberate strategy of “trading profit for scale” during its strategic expansion phase. Once USDC circulation exceeds $80 billion, RWA asset management scale and cross-border payment penetration reach breakthroughs, the company’s valuation logic will fundamentally change — evolving from a “stablecoin issuer” to a “digital dollar infrastructure operator.”

This requires investors to reassess its monopoly premium from network effects with a 3–5 year investment horizon. At this historic intersection of traditional finance and the crypto economy, Circle’s IPO is not just a milestone in its own development, but also a litmus test for the value re-evaluation of the entire industry.

Reference Articles:https://www.sec.gov/Archives/edgar/data/1876042/000119312525070481/d737521ds1.htm#rom737521_10https://www.bloomberg.com/opinion/newsletters/2025-04-02/stablecoins-are-growing-up?embedded-checkout=true

About Movemaker

Movemaker is the first official community organization initiated by the Aptos Foundation and jointly launched by Ankaa and BlockBooster, focused on building and developing the Chinese-speaking Aptos ecosystem. As Aptos’ official representative in the Chinese-speaking world, Movemaker aims to create a diverse, open, and prosperous Aptos ecosystem by connecting developers, users, capital, and various ecosystem partners.

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