Circle Annual Revenue of $2.7 Billion Yet Net Loss, Coinbase Is the Biggest Winner Behind USDC

Circle essentially is a interest rate-sensitive financial infrastructure company that earns from reserve interest, not from software platform subscriptions or trading fees.

Author: insights4vc

Translation: Deep潮 TechFlow

Deep潮 Guide: Circle has gone public on the NYSE, ticker CRCL. But what kind of business is this company really in? Based on its FY2025 annual report, this article breaks down Circle’s revenue structure, reserve model, revenue sharing arrangement with Coinbase, and the growth status of USDC, EURC.

The core conclusion: Circle is fundamentally an interest rate-sensitive financial infrastructure company that earns from reserve interest, not from software platform subscriptions or trading fees. This judgment directly impacts its valuation logic.

Full Text:

To understand Circle, it should first be positioned as a “reserve income company,” rather than a scaled software or payment fee platform. Its profit model heavily depends on stablecoin balances, short-term interest rates, and the portion of reserve income retained after paying out large distribution shares.

FY2025 data makes this very clear: total revenue plus reserve income amounts to $2.747 billion, of which reserve income contributes $2.637 billion, and other income is only $110 million. Therefore, Circle’s recent financial performance mainly depends on three variables: the average circulating USDC, the actual yield on reserves, and the economic structure of partner sharing arrangements (especially the contract with Coinbase).

Total revenue and reserve income grew from FY2024’s $1.676 billion to $2.747 billion in FY2025, a strong increase. Reserve income rose from $1.661 billion to $2.637 billion, and other income from $15 million to $110 million. Even so, Circle’s net loss attributable to common shareholders in FY2025 still reached $70 million, with operating expenses soaring, including a payroll expense of $845 million.

Chart: Key Financial Metrics of Circle FY2025

The core debate in 2026 is not whether Circle is expanding its footprint, but whether this expansion can truly be reflected in financial data. The key variables remain: can USDC’s balance continue to grow, how will reserve yields evolve in a declining interest rate environment, whether distribution costs will remain high long-term, and whether the scaling of new revenue streams like CCTP, CPN, USYC can keep pace with the growth of the reserve base.

Currently, Circle’s strategic boundaries are clearly expanding, but the core investment framework remains unchanged: it is still a financial infrastructure company whose profits are dominated by reserve income, not a diversified platform driven by software or trading revenue. It is highly sensitive to interest rates and balance scale.

Overview of Circle’s Business

Circle is a publicly listed fintech company on the NYSE, ticker CRCL. On March 9, 2026, the company filed its FY2025 10-K report, covering the period ending December 31, 2025. The balance sheet shows “Stablecoin Holders’ Deposits” at $74.9 billion, directly indicating that the company’s economic core remains the management of reserve-backed stablecoins, rather than a traditional pure software model.

From an analytical perspective, Circle can be broken down into four layers:

1. Stablecoin issuer, with main products USDC and EURC, liabilities corresponding to circulating stablecoins, assets are segregated reserves held for users.
2. Reserve income business, monetizing reserves through interest and dividends.
3. Developer, payment, and infrastructure layer, focused on expanding stablecoin use cases and transaction density.
4. Building a macro strategic layout around “Internet financial system,” including Arc, Circle Payment Network (CPN), and tokenized asset infrastructure.

However, disclosed data shows that the actual financial impact still primarily comes from the reserve income model, not scaled software or trading fee businesses. FY2025 total revenue plus reserve income is $2.747 billion, with reserve income contributing $2.6368 billion, and non-reserve income being relatively limited.

This distinction is crucial for valuation. Circle’s strategic narrative is broadening, but its revenue structure does not support a “software platform re-rating” story. Previously disclosed data shows that in 2024, “Other Products” revenue accounted for only 1% of total revenue, though management also indicated that other income would accelerate in 2025, with Q4 2025 other income at $37 million, up $34 million YoY. This is a positive signal but not enough to challenge the core profitability driven by reserve balances, reserve yields, and partner economic structures.

Another strategic pillar is regulatory positioning. Circle disclosed that in December 2025, it received conditional approval from the OCC to establish a national trust bank, named First National Digital Currency Bank, N.A. Management describes this as an important step to strengthen USDC infrastructure and potentially expand regulated custody and reserve management capabilities. This could enhance regulatory sustainability and institutional confidence in reserve governance, but it is not yet a disclosed profit driver.

Business Model and Economic Structure

Circle’s business model depends on two variables: the size of circulating stablecoins and the yield on reserves. The company explicitly defines reserve income as a function of reserve balances and reserve returns.

FY2025 reserve income was $2.6368 billion, up from $1.6611 billion in FY2024. In comparison, FY2025 other income was only $109.8 million (FY2024: $15.2 million), with subscription and service income at $84.8 million being the largest non-reserve item. This confirms that Circle’s profit structure is highly sensitive to interest rates and balance growth, even as auxiliary income starts from a low base.

Reserve management is conservative. Circle disclosed that as of June 30, 2025, about 87% of USDC reserves were held in Circle Reserve Fund—a government money market fund compliant with 2a-7 rules, managed by BlackRock and custodied by BNY Mellon. The rest is held in cash accounts serving USDC holders, mainly at globally systemically important banks. The reserve-building logic prioritizes liquidity, capital preservation, transparency, and compliance, rather than maximizing yield.

Circle’s economic structure is also deeply influenced by distribution arrangements, especially the agreement with Coinbase. Reserve income is recorded gross, but the company makes extensive downstream payments through distribution and trading costs. This means a significant portion of gross reserve earnings is paid out via distribution channels before operational expenses.

Data shows that FY2025 net income after distribution costs (RLDC) was $1.083 billion, while total revenue plus reserve income was $2.747 billion, indicating most gross monetization is paid out through distribution layers.

This is critical for modeling. Circle is not a pure beneficiary of rising interest rates or USDC balance growth—growth in reserve monetization does not translate one-to-one into retained profitability. According to earlier sensitivity disclosures, with an average reserve yield of 4.26% as of June 30, 2025, a 100 basis point change would alter reserve income by about $618 million, but distribution and trading costs would also change by about $315 million. This means a large part of reserve upside is shared with partners, and only the remaining part flows into RLDC before operating expenses. For institutional analysis, RLDC is a more useful intermediate profit measure than gross reserve income.

The reported profitability quality in FY2025 is also significantly affected by non-core and non-cash items. Circle disclosed a net loss of $70 million from continuing operations, but adjusted EBITDA was $582 million. The gap mainly results from high equity-based compensation tied to IPO-related vesting conditions—specifically, $424 million of equity compensation was recorded due to RSU performance conditions triggered at NYSE listing. Therefore, GAAP net profit is not the best measure of underlying economics or profitability.

The most important reason is Circle’s arrangement with Coinbase, which is its most significant and easily underestimated aspect.

When USDC launched in 2018, Circle and Coinbase jointly formed a consortium to govern the stablecoin. This structure was dissolved in 2023, with Circle taking sole issuance rights. But Coinbase retained a highly favorable revenue sharing agreement.

Chart: USDC Reserve Share Structure between Circle and Coinbase

Under the agreement, all reserve income from USDC held on Coinbase platform (USDC) belongs 100% to Coinbase; reserve income from other channels is split 50/50. In 2024, out of $1.01 billion total distribution costs, $908 million was paid to Coinbase. In other words, for every dollar Circle earns, about $0.54 flows to a company that neither issues USDC nor manages its reserves. By early 2025, Coinbase held 22% of USDC supply, up from 5% in 2022. As USDC becomes more concentrated at Coinbase, Circle’s payment burden also increases.

In summary, at this stage, Circle should be viewed as a reserve income-driven, interest rate-sensitive financial infrastructure company centered on stablecoins, rather than a software platform primarily driven by subscription or trading revenue. The platform’s option value is becoming clearer, especially with the expansion of Arc, CPN, and non-reserve income streams. But the disclosed FY2025 revenue structure still supports an analytical framework focused on reserve balances, reserve yields, and distribution sharing mechanisms. Until non-reserve income accounts for a significant share, reserve income remains the main driver of Circle’s profitability sensitivity and valuation debate.

Deep Dive into USDC and EURC

USDC

USDC is the core economic engine for Circle entering 2026. In FY2025, Circle disclosed that as of December 31, 2025, USDC circulation was $75.266 billion. Subsequently, Circle’s USDC product page shows that as of March 16, 2026, circulation is $79.2 billion. From year-end to mid-March, USDC’s circulation increased by about $3.9 billion, roughly 5.2%. Not explosive growth, but it indicates that net expansion continues on a solid base established in 2025.

Chart: USDC Supply (Source: Allium)

Circle’s FY2025 indicates a strong growth year for USDC. In Q4 2025, USDC circulation grew 72% YoY to $75.3 billion, with on-chain transaction volume up 247% YoY to $11.9 trillion. The average USDC circulation for the year was $64.87 billion, higher than FY2024’s $33.34 billion, but FY2025 reserve yield was 4.1%, lower than FY2024’s 5.0%. The key takeaway: revenue expansion in 2025 relied on balance growth, not yield improvements, as reserve yield declined YoY.

Circle also disclosed operational metrics indicating USDC is a high-turnover monetary tool rather than static collateral. In FY2025, USDC minting was $257.5 billion, redemptions $226.1 billion; stablecoin market share at year-end was 28% (based on third-party market cap data); and the number of active wallets at year-end was 6.8 million (per Circle’s own definition). The large minting and redemption volumes relative to the end-of-period stock suggest high transaction turnover, likely from exchange settlements, liquidity routing, collateral management, and DeFi flows, rather than simple buy-and-hold of reserve assets. Circle has not publicly provided detailed breakdowns of these use cases.

The narrative of USDC as a payment tool is becoming more credible, but still in early stages compared to reserve income. Visa has launched USDC settlement functionality in the US with select card and acquirer partners, supporting settlement of some Visa obligations on specific blockchains outside traditional banking hours. Circle views this as evidence that USDC can serve as a continuous settlement asset, not just a native crypto trading instrument. Although the scale is still small relative to Visa’s overall network, this is one of the clearest signals that USDC is being positioned as part of real-world payment infrastructure.

Partnerships for consumer and SME ecosystems are expanding. On December 18, 2025, Circle announced a partnership with Intuit to integrate USDC into TurboTax, QuickBooks, and Credit Karma. Strategically, this supports the argument that Circle is pushing USDC beyond trading venues and crypto-native users into mainstream financial workflows. But monetization remains opaque—Circle has not disclosed pricing, commission rates, or revenue sharing for these integrations, so progress at the distribution level should not be mistaken for high-margin payment revenue.

On market structure, Circle and Polymarket announced on February 5, 2026, that Polymarket will migrate from bridging USDC (USDC.e) on Polygon to native USDC over the coming months. This indicates Circle’s broader push to reduce reliance on bridging liquidity and increase native USDC issuance across chains. Native issuance can improve redemption transparency, reduce cross-chain operational friction, and align with regulatory priorities. But this migration also reveals structural challenges: fragmentation of cross-chain liquidity and bridging friction remain hurdles, not just technical issues.

Overall, USDC is a hybrid tool: primarily a settlement asset for exchanges and venues; a high-speed on-chain dollar used for collateral, liquidity routing, and infrastructure; and increasingly an emerging institutional settlement track through specific integrations. The growth of USDC payments is improving, especially with Visa settlement, Intuit integration, and broader infrastructure development. But the main economic driver disclosed remains reserve interest income, not explicit transaction fees from payment activities.

EURC

EURC is strategically important, though its direct economic contribution remains limited. The European regulatory environment is particularly relevant here. The MiCA regulation (EU 2023/1114), effective in 2023, applies to asset-referenced tokens and electronic money tokens from June 30, 2024, with broader implementation from December 30, 2024. This timeline means euro-pegged stablecoins are among the first to gain “regulatory-compliant and rated” status, boosting confidence among regulated issuers and exchanges supporting compliant euro stablecoins.

Circle disclosed that as of December 31, 2025, EURC circulation was 309,608,590 tokens. As of March 16, 2026, Circle’s EURC page shows circulation of €382.8 million. From year-end to mid-March, EURC grew by about €73 million, roughly 23.6%. While still small compared to USDC, this growth is meaningful, indicating EURC is gaining traction from a low base.

The overall euro stablecoin market remains small. Reuters reported in September 2025 that the total euro stablecoin market was about $620 million, while global stablecoin issuance was around $300 billion. Even with future growth, Circle’s reported EURC circulation of €382.8 million as of March 2026 suggests it is among the top euro stablecoins by supply.

Circle positions EURC as compliant with MiCA, supporting Avalanche, Base, Ethereum, Solana, and Stellar, with monthly proof reports. Strategically, EURC’s value to Circle may exceed its current direct financial contribution: it helps establish a European regulatory foothold, supports on-chain euro-dollar workflows alongside USDC, and provides optionality as European digital currency policies evolve. Reuters’ late 2025 report also notes increasing European institutional and policymaker interest in alternative stablecoin infrastructure to the dollar-dominated system, supporting the optionality argument.

Over the next 12–24 months, EURC is better viewed as an enabling layer rather than a standalone profit driver. Its scale is under €5 billion, and Circle has not disclosed separate revenue data. For EURC to become financially meaningful, three things are needed: substantial growth in euro-pegged floating supply, adoption beyond crypto-native capital markets for payments and finance, and a distribution path that avoids heavy economic sharing like USDC’s model. In other words, EURC is strategically important but not yet a core profit driver.

FY2025 Financials and Key Metrics

Circle’s FY2025 financials reaffirm: the company is primarily a reserve income business—total revenue plus reserve income was $2.747 billion, up from $1.676 billion in FY2024. Reserve income was $2.637 billion (FY2024: $1.661 billion), other income was $110 million (FY2024: $15 million). The YoY increase is almost entirely driven by reserve income expansion, not a broad shift toward software or trading fee revenue.

Chart: Circle FY2025 Revenue Breakdown

Chart: Circle FY2025 Cost Breakdown

Cost structure is also a key part of the underwriting framework. In FY2025, distribution and trading costs were $1.662 billion, up from $1.011 billion in FY2024. Operating expenses rose from $492 million to $1.179 billion, with payroll at $845 million (up from $263 million). This confirms that higher reserve income creates gross profitability, but a large share is paid out via partner sharing, and rising operating costs further absorb this.

To measure operating leverage, RLDC (net revenue after distribution costs) is more useful than top-line revenue. Circle disclosed FY2025 RLDC of $1.083 billion, up from $659 million in FY2024; RLDC profit margin has been steady at 39% over two years. This stable margin indicates distribution costs roughly scale with reserve income, and higher interest rates or larger balances do not translate into structurally better retained economics. Growth is achieved, but the core economic share retained after distribution has not substantively improved.

A clearer signal of operating leverage appears in management’s adjusted guidance rather than GAAP. Circle disclosed FY2025 adjusted operating expenses of $508 million, and guides FY2026 adjusted expenses between $570 million and $585 million. This suggests continued investment in growth rather than a shift to harvesting mode.

Chart: Key Items on Circle FY2025 Balance Sheet

The balance sheet also supports specific interpretations of the business model. As of December 31, 2025, Circle reported $75.068 billion in cash and cash equivalents segregated for stablecoin holders, and $74.913 billion in stablecoin holders’ deposits. This structure aligns with a reserve-backed issuance model built around segregated balances, rather than a traditional loan-based asset-liability profile.

From an analysis perspective, this makes Circle more akin to a narrow-interest-margin business rather than a high-commission fintech, with the key condition that reserves are described as held for token holders and intended to be bankruptcy-isolated under disclosed structures.

Q1 2026 Preview and FY2026 Bull, Base, Bear Scenarios

Entering Q1 2026, the interest rate environment is less favorable than the recent peak cycle. As of March 16–17, 2026, the effective federal funds rate was 3.64%, SOFR was 3.65%. Circle’s sensitivity framework uses the December 2025 average yield of 3.64% as a reference. The implication is that: at the start of 2026, reserve return environment remains significantly below FY2024’s 5.0%, closer to late 2025 levels, meaning that if Circle wants to sustain reserve income growth, balance growth must do more work.

At least at the balance level, Q1 2026 is constructive. Circle disclosed that as of March 16, 2026, USDC circulation was $79.2 billion, higher than $75.266 billion at year-end; EURC increased from €309 million to €382 million. This suggests that average stablecoin balances in Q1 may have improved relative to Q4 exit levels, partially offsetting the low-yield environment.

Management’s FY2026 guidance indicates continued diversification of revenue streams, but the fundamental economic model remains unchanged. Specifically: other income of $150–170 million, RLDC profit margin of 38–40%, adjusted operating expenses of $570–585 million. The signals are twofold: first, management expects non-reserve income to grow; second, even according to their guidance, these revenues are still small relative to the reserve income engine.

Bull Case: USDC continues to expand in Q1 and Q2, benefiting from increased institutional settlement use, higher on-chain velocity, and incremental distribution progress. In this scenario, even if actual yields stay at late 2025/early 2026 levels, reserve income remains resilient. Distribution costs will rise, but the retained economic share after distribution could still be sufficient to maintain or approach the guidance range, absorbing higher operating expenses. Essentially, this is a “floating balance growth offsetting yield compression” scenario. Current balance trends and ecosystem expansion support this, but it still depends on sustained trading volume and adoption momentum.

Base Case: As trading activity and DeFi usage normalize, USDC growth slows to low single-digit quarter-over-quarter increases. Reserve yields anchor around 3%, roughly aligned with EFFR and SOFR. In this scenario, reserve income stabilizes or slightly increases (depending on average balances), but distribution costs remain high due to partner sharing. RLDC profit margins stay within the 38–40% range, with modest top-line progress but limited structural margin expansion.

Bear Case: USDC growth stalls or declines due to risk appetite contraction, exchange outflows, or market share pressure, while interest rates further decline from already low levels. Lower yields reduce reserve income, and mechanically lower some distribution costs, but RLDC weakens overall. This is more severe because Circle has already committed to higher expense plans entering FY2026, so a decline in balances and yields would directly pressure the company’s concentration risk with partners and operational cost rigidity.

Strategic Positioning and Competitive Landscape

The most accurate characterization of Circle is: a regulated digital currency network operator with two layers—one currently dominant in financial metrics as an issuer and reserve manager, and a strategic but not yet economically dominant layer of applications, interoperability, and developer services. This distinction is important because, until non-reserve income becomes significantly larger, Circle’s valuation, profitability sensitivity, and risk profile remain tightly linked to monetary policy and stablecoin market structure.

The most important strategic option now is Circle Payment Network (CPN). Launched in April 2025, as of February 20, 2026, 55 financial institutions are registered, 74 are in qualification review, with an annualized transaction volume of $5.7 billion based on 30-day metrics. These are meaningful early signals of network formation and institutional interest. But without disclosed fee rates, revenue contribution, or profit margins, CPN’s strategic value remains more evident than its immediate financial impact.

Another credible non-reserve monetization path is interoperability tools. Circle disclosed that in March 2025, it launched CCTP V2, enabling fast transfers that generate transaction fees when used. This is a strong non-reserve monetization path because it prices specific technical capabilities rather than relying solely on usage volume to generate value. Still, FY2025 transaction revenue contribution remains very small, negligible relative to reserve income.

Circle’s USYC segment, acquired via Hashnote, is also strategically noteworthy. Circle describes USYC as representing on-chain money market fund shares, mainly used as collateral in digital asset markets, and earns fees including performance fees.

This is a reasonable extension of USDC, as it addresses yield-bearing collateral and margin needs that stablecoins alone cannot fully solve. But the market currently lacks public disclosures of USYC assets, income, or profitability, so it remains more a strategic building block than a standalone modeling driver.

In terms of competition, the most direct rival in the US dollar stablecoin space remains Tether. Reuters reported in February 2026 that USDT circulation is about $184 billion, giving Tether a significant scale advantage.

Circle’s differentiation remains clear: listed company disclosure standards, reserve asset constraints aligned with emerging regulations, and stronger positioning with regulated institutions and payment networks. In this sense, Circle’s competitive edge is less about absolute size and more about institutional credibility and regulatory transparency.

Another competitor is PayPal’s PYUSD. Announced on March 17, 2026, PYUSD is expanding to 70 markets globally. Its strategic relevance lies in being embedded within a global consumer and merchant payment network, contrasting with Circle’s focus on exchanges and infrastructure.

Circle’s current advantage is deeper USDC liquidity, larger scale, and stronger integration with crypto markets; PYUSD’s differentiation is embedding within mainstream payment platforms and merchant distribution.

The European landscape may become more challenging. Reuters reported that major European banks including ING, UniCredit, BNP Paribas are forming a consortium to launch euro stablecoins in late 2026, and policymakers are openly discussing strengthening euro digital currency infrastructure to counter dollar dominance. This poses a medium-term competitive threat to EURC, as bank-led euro stablecoins could combine regulatory credibility with embedded enterprise and bank distribution. As of March 2026, this remains a future risk rather than an immediate supply-side alternative.

Conclusion

Circle’s FY2025 data continues to support viewing it primarily as a reserve income business—profitability driven by stablecoin balances, reserve yields, and partner economic structures, with software or payment monetization contributions still insufficient to overturn this structure.

USDC and EURC are expanding, and new initiatives like CCTP, CPN, and USYC improve strategic narrative, but these are still not significant enough financially compared to the reserve income base.

Therefore, the core underwriting framework remains focused on floating balance growth, interest rate sensitivity, and the structural weight of distribution costs—especially the Coinbase-linked portion.

Chart: Circle Internet Group Inc — Consolidated Income Statement

Chart: Circle Internet Group Inc — Consolidated Balance Sheet (Part 1)

Chart: Circle Internet Group Inc — Consolidated Balance Sheet (Part 2)