Original Title: Coinbase Will Have to Acquire Circle – The Only Question Is Price
Original Author: @yiryan, Member of vectordao
Original Translation: zhouzhou, BlockBeats

Editor's Note: USDC is Coinbase's second largest source of revenue, but due to the partnership with Circle, the revenue attribution is limited. Circle controls the protocol layer, focusing on expanding the overall market value, while Coinbase aims to fully capture USDC revenue, achieving revenue consolidation and protocol control. If Coinbase acquires Circle, it can obtain full revenue, product synergy, and regulatory advantages. In the long run, acquisition is a reasonable and necessary strategic choice, with the key lying only in the price.

The following is the original content (slightly reorganized for ease of reading comprehension):

Background

I have worked in the crypto industry for many years—first at CoinFund (an early-stage fund), and later joined Coinbase, helping expand its venture capital strategy.

All the content in this article is based on public data: Circle's S-1 IPO prospectus (April 2025) and Coinbase's public financial reports. There is no insider information—just analysis that anyone can replicate, although most people won't bother.

USDC Supply Structure Breakdown

Total USDC Supply = USDC held by Coinbase + USDC held by Circle + All other parts

As per the definition in the S-1, Platform USDC refers to "a proportion of stablecoins held in a custodial product or wallet management service by a party." This means:

·Coinbase = Coinbase Prime / Exchange

·Circle = Circle Mint

·Others = USDC held on platforms like Uniswap, Morpho, Phantom, etc.

Coinbase's share of the total USDC supply is growing rapidly—it reached about 23% in the first quarter of 2025. Meanwhile, Circle's share has remained stable.

This is reasonable—because Coinbase has a greater influence in the consumer, developer, and institutional markets.

USDC Revenue Sharing

Whether it's Circle or Coinbase, both can receive 100% of the USDC reserve revenue on their platform. For USDC held "off-platform" (i.e., the "other portion"), both parties split 50/50.

However, here's a key point: Circle has disproportionately higher revenue from off-platform USDC. Despite Coinbase having four times the amount of USDC on its platform compared to Circle, its revenue advantage is only around 1.3 times.

Based on a rough estimate of a 50/50 split of off-platform revenue, the following revenue sharing situation is derived:

Circle: Betting on Market Size, Not Control

Circle's motivation is clear: to expand the overall circulation of USDC, even if that USDC is not held on its platform. In Circle's ideal world, USDC would become the first stablecoin for the U.S. dollar—this in itself would secure its market position. It benefits from being at the protocol layer by:

· Issuing and maintaining the USDC smart contract across more than 19 chains;

· Controlling the CCTP for native cross-chain and minting/burning flows.

While USDC on-platform generates more revenue, its growth is not as significant. In expanding to large clients, Circle likely loses to Coinbase's scale. However, as long as USDC becomes the top USD stablecoin, Circle remains the winner—this is a game of market size rather than profit margins.

The future total market for USDC could be enormous, so even if it cannot capture all the profits, it's not a bad outcome—most income growth will come from the "off-platform" portion. This motivation aligns with Circle's capabilities: governing USDC, its infrastructure, and technical roadmap.

Coinbase: Must Fully Control USDC

Macro Perspective

USDC is Coinbase's second largest revenue source, accounting for approximately 15% of total revenue in Q1 2025, surpassing the staking business. More importantly, this is Coinbase's most stable and scalable infrastructure revenue source. With the global expansion of USDC, its potential will experience exponential growth.

USDC will become a key moat for Coinbase. While centralized exchanges (CEX) revenue remains dominant, USDC revenue is more stable in comparison and will grow in sync with the overall crypto economy.

USDC is likely to become one of the top three USD stablecoins, thus becoming a major channel for exporting the dollar globally through technology. Fintech and traditional financial giants have long recognized this and have entered the space. However, USDC has a first-mover advantage and is backed by the native crypto ecosystem, poised to survive and thrive. From an infrastructure and regulatory perspective, fully owning it is a highly valuable story.

Micro Perspective: The Coinbase Monetization Paradox

Coinbase is a key driver of USDC's growth, but it is structurally constrained. Currently, USDC is Coinbase's second largest revenue source (only after trading). Therefore, every product decision must consider revenue and profit margins. However, the issue is this: as Coinbase expands the market, it cannot fully control the profits because "off-platform" revenue can only be shared in half.

The irony is this: Coinbase is attracting users, building infrastructure, and increasing trading frequency, yet it is capped on the revenue side due to architectural issues. Its consumer and developer products were "crippled" from the start.

Coinbase's natural response is to convert the "potential market" into "Coinbase USDC" - the on-platform, fully monetizable portion (balances in custody products earn 100% reserve yield). This strategy has indeed worked: Coinbase's on-platform USDC has quadrupled in two years. However, this only applies to custody USDC, i.e., Exchange + Prime.

The issue lies in the "custody gray area" - user growth occurs here, but revenue attribution becomes blurry.

· Coinbase Wallet is non-custodial, and although Smart Wallets have improved the experience and may have incorporated a shared key mechanism, they still do not qualify as "platform USDC" as defined in the S-1.

·If in the future, the majority of users interact with on-chain products through such wallets, the ownership of this portion of USDC will fall into a gray area between Circle and Coinbase.

·Base (Coinbase's L2) also follows a non-custodial model, where users can freely exit to the Ethereum L1 as Coinbase does not hold the keys. Therefore, even though Coinbase serves as the entry point, the USDC on Base is unlikely to be classified as 'Coinbase USDC'.

Conclusion: Coinbase has propelled the growth of USDC but has embedded a weakening system. As long as it does not control the entire protocol, it will consistently face uncertainty regarding revenue attribution. The only definitive solution is to acquire Circle and rewrite the rules.

Benefits of Coinbase Acquiring Circle

·100% Revenue Attribution: No more debates over 'custodial vs. non-custodial.' Coinbase can outright claim all interest income generated by the full $600 billion USDC, regardless of where this USDC is held.

·Protocol Control: USDC's smart contract, multi-chain integration, CCTP all become internal assets.

·Strategic Product Synergy: Wallets, Base, and future on-chain experience products can seamlessly and organically monetize USDC.

·Regulatory Integration: Coinbase is already a policy leader and, with control over USDC, can steer stablecoin regulation in a specific direction.

Uncertainties / Points to Explore

·Growth Potential: With USDC currently valued at approximately $600 billion, theoretically, it could grow to $5 trillion, corresponding to $200 billion in annual reserve earnings, potentially propelling Coinbase to the level of 'The Magnificent Seven' (Mag7) profit.

·Regulatory Policies: The U.S. is pushing for stablecoin legislation, which is positive for market growth. Stablecoins will become a new vehicle for the global dominance of the U.S. dollar, but this may also restrict how platforms can advertise earnings or savings products. If Coinbase owns the entire stack, it can flexibly adjust strategies to address policy changes.

·Operational Complexity: USDC was initially operated by a consortium, and its structure may be based on legal/regulatory considerations at the time. While these barriers seem manageable under a unified architecture, the legal framework could harbor unknown risks. However, at present, there appear to be no insurmountable issues.

Acquisition Price

No one can predict market valuation accurately, but we can refer to the following data:

· Circle is planning an IPO at a $50 billion valuation;

· Ripple has previously proposed a $100 billion valuation;

· Coinbase currently has a market capitalization of around $700 billion;

· USDC currently accounts for 15% of Coinbase's revenue, and if integrated post-acquisition, there is a clear path to increase this proportion to over 30%.

My assessment is:

· Circle is a natural acquisition target for Coinbase, and Coinbase is well aware of this;

· Circle wants the public market to price them ($50 billion is the target);

· Coinbase wants to see what valuation the market gives Circle;

· Coinbase knows full well:

 1. It must have a full USDC stack;

 2. Post-integration, it can let USDC account for 15%~30% of its revenue;

 3. In terms of revenue value, the "reasonable valuation" of USDC should be between $100 billion and $200 billion.

Circle also knows this—and realizes that as long as USDC continues to grow, Coinbase will eventually choose to acquire directly to address the ongoing business, product, and governance friction in their partnership.

Final View

Coinbase should acquire Circle, and it is highly likely to do so.

While the current collaboration between both parties can continue, in the long run, the conflicts at the platform, product, and governance levels are too significant to ignore. The market will provide a price, but both sides already clearly understand each other's value.

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