Behind the CRCL Callback, who captured the economic value of USDC?

Original Title: Circle Goes Public: CRCL Valuation & the Economics of USDC

Original Author: Tanay Ved

Original Translation: johyyn, BlockBeats

Editor's Note: The following analysis is based on the recent market valuation movement of Circle, the revenue structure of USDC, and their partnerships. The background of this analysis is the passage of the GENIUS Act, which has brought renewed attention to the stablecoin race. Circle's market valuation briefly surpassed $630 billion, exceeding the total value of USDC in circulation. The author, using on-chain data and public records, delves into Circle's current revenue structure, its partnership with Coinbase, and its cost structure. The author points out the sustainability pressure and growth concerns behind its high valuation, especially in a market environment of declining interest rates and intensified competition. The author also issues warnings and outlooks on the diversification of its business model.

The following is the original content (slightly rephrased for better readability):

Key Points:

1. Circle's Market Valuation Surged but Valuation is High: The passage of the GENIUS Act propelled Circle's market valuation to $630 billion, now exceeding the value of circulating USDC. However, based on its valuation of approximately 37 times the past 12 months' revenue and about 401 times the net profit, it is increasingly disconnected from its fundamentals.

2. Coinbase is a Core Partner and Major Cost: In 2024, Coinbase received about 56% of the USDC reserve revenue, which has become a major distribution cost for Circle. Nevertheless, the partnership between the two is crucial for expanding the USDC scale through Coinbase's products and ecosystem.

3. Reserve Revenue is Expected to Grow but Revenue Share is Limited: According to on-chain data and public records, Circle's USDC reserve revenue may increase from $1.6 billion in 2024 to over $9 billion in 2029. However, under the current revenue-sharing terms, Circle may only retain less than half of that amount, underscoring the importance of expanding revenue sources beyond the reserve.

4. Growth Depends on Scale Expansion and Market Share Battle Amid Declining Rates: With interest rates expected to decrease, Circle's long-term revenue potential crucially depends on expanding the supply of USDC and gaining market share in the increasingly competitive landscape from newly approved issuers.

Introduction

Stablecoins are experiencing an explosive moment, with Circle at the center of attention. The issuer of the U.S. stablecoin USDC, Circle Internet Group (the stablecoin being the second-largest, with a market capitalization of around $61 billion, holding 25% market share), went public on the New York Stock Exchange (NYSE) on June 5th. Since then, Circle's stock price has skyrocketed over 700% from the $31 per share initial public offering (IPO) price to around $263 per share. With a market valuation of $63 billion, Circle's current valuation surpasses that of its issued USDC (reserve size).

Circle's IPO came at the right time, benefiting from the momentum of the U.S. Senate passing the "GENIUS Act." Combining the increasing demand for compliant digital dollars in the market, Circle is capitalizing on the strong interest in the pure stablecoin exposure. Its robust debut performance has also fueled interest in other crypto companies (such as Bullish and Gemini Exchange) to go public, stimulating increased public market activity and reigniting interest in stablecoin economics.

In this edition of the "Coin Metrics Network Status" report, we analyze Circle's post-listing performance and valuation, dissect who is capturing the economic value of USDC, and predict Circle's future revenue potential based on interest rates, USDC adoption, and the competitive landscape of the stablecoin market.

Circle (CRCL) Performance

Circle's IPO was one of the most remarkable among U.S. tech stock IPOs in recent years. The issuance received over 25 times oversubscription, and the stock opened well above the $31 IPO price. Even as the broader crypto market experiences a pullback, CRCL's stock price continues to rise against the trend, propelling Circle's market capitalization to $63 billion.

Valuation Metrics

But does such a high valuation align with the company's fundamentals? Based on Circle's projected 2024 total revenue of $1.67 billion and a net income of $157 million, CRCL's current trading price represents around 37 times the past twelve months' revenue (price-to-sales ratio, P/S) and 401 times the net income (price-to-earnings ratio, P/E). These multiples far exceed comparable fintech companies such as NuBank (around 27 times), Robinhood (around 45 times), and even include more diversified revenue sources and higher profit margins like Coinbase (around 57 times).

Multiple factors seem to have collectively driven this premium. Circle has provided the public with a direct pathway to invest in the growth of the digital dollar, benefiting both from the GENIUS Act and its first-mover advantage in the regulated market. With the potential market expansion, USDC and Circle are well positioned to benefit from it. However, facing a $650 billion market cap, narrative-driven enthusiasm seems to have surpassed its potential fundamentals. Key risks include heavy reliance on interest income (if US interest rates decline, this income may be compressed) and the increasingly fierce competition from banks and fintech companies (the GENIUS Act has paved the way for more regulated stablecoin issuers adopting similar business models).

Who Has Captured the Economic Value of USDC?

Almost all of Circle's revenue comes from the interest income generated by the USDC reserve. These reserves are held in cash in banks and in the Circle Reserve Fund managed by BlackRock, which invests in short-term US Treasuries. By the end of 2024, Circle generated $1.6 billion in gross income on a $440 billion reserve, implying an effective reserve yield of around 3.6%. However, after paying out over $900 million in distribution costs (mostly to Coinbase), Circle retained $768 million in net income from its USDC business.

Revenue Split Between Circle and Coinbase

Although Circle remains the sole issuer of USDC, it has not captured all of its value. Through its equity stake in Circle and a revenue-sharing agreement, Coinbase earns:

1. 100% of the interest income generated by customers holding USDC through the Coinbase platform;

2. 50% of the interest income generated by customers holding USDC elsewhere.

With this arrangement, both parties have incentives to increase the adoption of USDC. Coinbase has played a crucial role in driving the growth of USDC, significantly enhancing the distribution capabilities of USDC through its exchange, Base Layer-2 network (currently hosting $37 billion in USDC), and new products like Coinbase Payments. According to Circle's S-1 filing, Coinbase's share of USDC has steadily increased, rising from about 5% in 2022 to 12% in 2023, and then to 20% in 2024. As of the first quarter of 2025, this share has accounted for 22% of the total supply, with its platforms collectively holding $12 billion in USDC.

The following diagram illustrates the fund flow distribution between Circle and Coinbase of the income generated by USDC in 2024. By considering the USDC reserve yield received by Coinbase as Circle's cost expense, it distinctly showcases how value flows from the USDC reserve to Circle, and ultimately through a revenue-sharing agreement allocated to Coinbase's operation.

Based on the aforementioned forecast, propelled by the continuous growth of USDC holdings on the platform, Coinbase captured over 50% of Circle's total USDC revenue. Despite stablecoin revenue accounting for only about 23% of Coinbase's total revenue, with some of the earnings being returned to users through "USDC Rewards," the company still retains significant upside potential. This interdependent economic relationship raises a key question: given Circle's market valuation has reached 82% of Coinbase's, how should investors conduct a relative valuation benchmark assessment of the two companies?

Future Outlook on Projected USDC Interest Income

Looking ahead, Circle's revenue trajectory depends on three key variables: the circulating supply of USDC (influenced by overall stablecoin market growth and its market share), current interest rate levels, and the amount of USDC held on the Coinbase platform.

While the historical supply growth of USDC provides a useful benchmark, predicting future supply growth carries inherent uncertainty. The actual impacts of regulatory clarity, evolving competitive dynamics, and the true effects of macroeconomic conditions could significantly influence stablecoin adoption rates and market share. Therefore, we have constructed a model with gradual growth trends—incorporating short-term tailwinds (such as stablecoin legislation advances) as well as balancing the longer-term headwinds from intensified competition and declining yields.

To better understand the long-term economic model of USDC, based on these core elements, a forecast model of the net income for both Circle and Coinbase up to 2029 has been developed.

In conclusion, the long-term revenue potential of Circle and Coinbase is closely tied to the expansion of USDC supply and the maintenance of market share, which will help hedge against the adverse impacts of declining yields. By the end of 2025, the total reserve income generated by USDC is expected to reach $2.44 billion, with Coinbase benefiting approximately $1.5 billion and Circle benefiting around $940 million.

If the current market dynamics remain unchanged, this revenue pool could grow to $9.15 billion by 2029, with Coinbase taking $5.99 billion and Circle taking $3.16 billion.

It is important to note that this estimate only covers USDC reserve revenue, which currently accounts for the vast majority of Circle's revenue and does not include the potential upside from emerging business lines (such as the Circle Payments Network). The latter may play an increasingly important role in revenue diversification in the future.

Conclusion

Circle's IPO marks a significant milestone in the stablecoin race, providing investors with a direct opportunity to participate in the growth of the "digital dollar." In the near term, regulatory tailwinds and Circle's position in the compliant market have provided favorable support; however, its long-term growth prospects will depend on USDC supply expansion, market share gains, and the transformation of its revenue structure towards non-reserve sources of income.

The current valuation multiple of CRCL is significantly higher than its fundamentals, and the key question for the future is whether regulatory clarity, institutional partnerships, and distribution capabilities can be translated into lasting, sustainable growth drivers.

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