Circle callback, is it still worth buying?

Author: Leo Z

1. What is Circle

Circle is the issuer of USDC. USDC is the world’s second-largest stablecoin, with circulating supply of about $77 billion. Behind every USDC is an equivalent amount of U.S. dollar assets (mainly short-term U.S. Treasuries) held in reserve.

Circle’s revenue source is simple: it invests these reserves in Treasuries to earn the spread. FY2025 total revenue was $2.75 billion, with 95% coming from reserve interest. Listed in June 2025, its current market cap is about $15-20 billion.

Circle’s market pricing is basically equal to “USDC circulating supply × interest rate × a conservative multiple.” This means: if you think Circle is only an interest-eating company, the current valuation is roughly reasonable. If you think it is turning into a fee-based digital dollar infrastructure network, the current price is far from reflecting this value.

This article will answer: Is the transition happening? What evidence is there? And what is it worth?

2. The core question: Is USDC being “held” or being “used”?

Before discussing valuation, answer a question that matters more than any financial model.

With the same $77 billion of USDC, if it’s only being stored by institutions to earn the spread, Circle is an interest-rate-sensitive financial company, valued at 10-15x. If it’s being used frequently for payments, settlement, cross-border transfers, and developer calls, Circle is growing into a fee-based infrastructure network, valued at 25-30x.

Two key data points can help you judge:

First, the growth rate of USDC on-chain transactions far exceeds the growth rate of circulating supply. In FY2025, circulating supply grew 72%, while on-chain transaction volume grew 247%. This means each dollar of USDC is being used more frequently. This isn’t “more stock,” it’s “faster velocity.”

Second, USDC has already surpassed USDT to become the largest settlement asset. Visa Onchain Analytics filters out about 85% of on-chain noise (bots, internal exchange transfers, high-frequency arbitrage). After adjustment, USDC accounts for 64% of real-economy settlement volume (Mizuho, Feb 2026), while USDT is only about 28%—even though USDT’s circulating supply is 2.4x that of USDC.

This gap itself is the strongest signal: USDC is moving from “an asset people hold” to “a network people use.” But this shift isn’t finished yet—later we’ll discuss what conditions are needed to confirm it.

3. A three-layer revenue structure

Circle’s revenue is split into three layers. The market currently prices almost exclusively the first layer.

First layer: USDC interest income—what Circle makes money from today

USDC is Circle’s starting point and the source of the current 95% of revenue. As of the end of 2025, USDC circulating supply is $75.3 billion, up 72% year over year, far exceeding Circle’s own 40% annualized growth target.

The revenue logic is straightforward: about 80% of the USDC reserves are invested in short-term U.S. Treasuries (via the USDXX fund managed by BlackRock), earning the spread.

Interest income ≈ average USDC circulating supply × reserve yield

Q4 2025 reserve yield was 3.81%, down 68 basis points from the prior quarter. This exposes the core contradiction: circulating supply is growing quickly, but interest rates are falling—one is offsetting the other. If the Fed target rate drops to 3%, Circle would need USDC growth to over $150 billion to maintain its current revenue level.

Structural issue: Coinbase takes most of the revenue. Under the revenue-sharing agreement signed in 2023, 100% of USDC interest on the Coinbase platform goes to Coinbase, while for interest outside the platform Coinbase takes 50%. In FY2025, for every $1 of interest Circle earns, about 60 cents goes to distribution partners.

The good news is that the profit margin is improving. RLDC (Revenue Less Distribution Costs) profit margin expanded from 30.0% in Q4 2024 to 40.1% in Q4 2025. Net revenue rate of 1.2-1.8% is after deducting Coinbase’s revenue share and operating costs.

Second layer: payments and trading revenue—new business that’s growing

This is the key to whether Circle can shake off the “interest-rate company” label.

CPN (Circle Payments Network) launched in May 2025, providing 7×24 cross-border settlement based on USDC for banks, payment companies, and enterprises. As of Feb 2026, annualized TPV is $5.7 billion, growing about 100x since launch. 55 institutions have integrated, 74 are under review, and 500+ are in the pipeline. It covers 14 markets including Brazil, Canada, Hong Kong, India, Mexico, Nigeria, and the United States.

But $5.7 billion compared to the global cross-border payments market of $16 trillion is still less than four ten-thousandths. CPN’s value isn’t in today’s scale—it’s in whether growth can be sustained. If it captures just 1% market share in cross-border payments, that would mean $160 billion in annualized transaction volume—fees generated could be close to or even exceed interest income, and they wouldn’t be affected by interest rates.

CCTP (cross-chain transfer protocol) enables native cross-chain transfers of USDC through “burn-mint.” In Q4 2025, it handled $41.3 billion, up 3.7x year over year. USDC cross-chain market share rose from 25% at the end of 2024 to 62% as of Jan 2026, covering 30 chains. CCTP V2 introduced Fast Transfer fees—a new source of revenue.

Other Revenue (non-interest revenue) is the most direct “evidence of transition.” In FY2025, it jumped from $3 million/quarter to $37 million/quarter, including subscription services of $24.7 million, transaction revenue of $12.2 million, and Canton Network validation node revenue of $7 million. Management guidance for 2026 is $150-170 million.

This portion of revenue isn’t affected by interest rates, and it doesn’t require revenue-sharing with Coinbase. When it exceeds 10% of total revenue, the market may start using a different valuation approach for Circle. Currently, it’s about 4%.

Third layer: settlement platform—long-term possibility

Arc is Circle’s institutional-grade settlement chain planned to go live on the mainnet in 2026, with USDC as the native gas token. The testnet has already processed over 166 million transactions, with confirmation times of 0.5 seconds and participation from 100+ institutions (including Goldman Sachs and Mastercard).

Arc’s roadmap is divided into four phases:

M1 public testnet (completed) → M2 real funds on-chain (2026) → M3 margin/collateral/settlement use cases live (2027-28) → M4 write into institutional standard operating procedures (2029-30)

Before M2, Arc’s value is zero. But if it ultimately becomes an institutional-grade settlement standard, Circle’s value won’t be “a fees/interest company” anymore—it becomes a “platform company.” This is a necessary condition for 10x+ returns.

4. Are we seeing the transition happen? Seven dimensions

It’s easy to misjudge by looking at any single metric. The key is whether multiple dimensions are improving at the same time—when scale, activity, profit margins, new revenue, and user growth all point in the same direction, the transition is happening.

5. Three most important tracking indicators

① USDC circulating supply (check daily)

The base for Circle’s revenue. Circulating supply × reserve yield = interest income. You should track “quarterly average circulating supply” rather than end-of-period snapshots. Currently about $77 billion.

Data source: defillama.com/stablecoin/usd-coin (updated daily), circle.com/transparency (weekly reserve attestations)

② USDC share in Visa adjusted transaction volume (check weekly)

Answers the core question: Is USDC being used or being held? Supply makes up only 25%, but adjusted transaction volume makes up 64%—each dollar of USDC does 2-3x more “work” than USDT.

Data source: visaonchainanalytics.com → filter by Stablecoin → click “Show % of Total” → read the USDC line

③ Other Revenue (non-interest revenue) (check each quarter)

The only indicator that directly proves Circle is earning money beyond interest. Not affected by interest rates, and no need to share with Coinbase. Currently $37 million/quarter, with guidance of $150-170 million (2026). When it breaks above 10% of total revenue, valuation methods will change.

Data source: circle.com/pressroom (quarterly earnings reports), SEC EDGAR search for Circle Internet Group

6. Recent catalysts

Coinbase revenue-sharing agreement expires (Aug 2026)

This is the largest single catalyst within the next 24 months. Currently, Circle shares about 60% of its revenue with partners. If renegotiation lifts RLDC profit margin from 40% to 50-55%, the effect would be like an instantaneous increase of 25-35% in profit. But Coinbase has little incentive to give up much—distribution of USDC on the Coinbase platform is still Circle’s biggest growth engine. The outcome is uncertain, but the probability is higher that the direction will be better than the current state.

OCC national trust bank license

Conditionally approved in Dec 2025. Full approval would mean: it can open accounts directly with the Federal Reserve (earning IORB interest and eliminating counterparty risk), bypass commercial banks to process the $483 billion in issuance/redemption flows each year, and build an insurmountable trust moat for enterprises and governments to adopt USDC. No other stablecoin issuer has this.

x402 Foundation (established Apr 2026)

Coinbase contributes the x402 payments protocol to the Linux Foundation. x402 activates the HTTP 402 status code as an internet-native payments layer, allowing AI agents, APIs, and applications to settle directly in HTTP interactions—defaulting to USDC.

Participants: Google, AWS, Stripe, Visa, Mastercard, Amex, Shopify, Microsoft, Cloudflare, Circle. If x402 becomes the AI agent payment standard, every machine-to-machine micro-transaction will increase USDC usage (velocity) without needing to increase holding (supply).

Note: x402 is driven by Coinbase, not by Circle. Impact on CRCL: mildly bullish—expands USDC usage scenarios, but doesn’t change the overall scale of the fundamentals.

7. Conditions for 5-10x returns

3-5x (high confidence)—purely from USDC growth

USDC at 40% CAGR reaches about $200-300B by 2028. Even if interest rates fall to 3%, $250B × 1.5% net spread = $3.75 billion in net revenue. At 20x, that implies a market cap of $75 billion. From the current $15-20 billion to $75 billion is roughly 4x. No contribution needed from CPN or Arc.

10x (requires multiple conditions simultaneously)

From $15-20B to $150-200B, all of the following must happen at the same time:

1. CPN TPV breaks above $100 billion within 2-3 years, with at least one major corridor entering formal production

2. Coinbase revenue-sharing agreement improves, with RLDC profit margin reaching 50%+

3. Other Revenue exceeds 10% of total revenue, proving the presence of scalable non-interest income

4. Arc reaches at least the M2 stage (real funds on-chain) and starts being priced by the market

Right now, only the second condition (profit margin) is clearly improving. 10x is a position you “earn,” not one you “bet” on.

8. Key risks

Interest rates falling faster than USDC growth

This signal already appeared in Q4 2025: interest rates fell by 68 bps, partially offsetting 100% of circulating supply growth. If the Fed drops to 2.5-3% in 2026-2027, there may be a window of 1-2 quarters where earnings fall below expectations.

Tether compliance push

USDC’s biggest differentiated advantage is compliance. But in the first three quarters of 2025, Tether earned $10 billion and is in talks with the Big Four accounting firms for a full audit. If Tether gains compliant status within 2-3 years, USDC’s differentiation would be substantially weakened. USDT’s current market share is over 60% with a market cap of $183 billion—it has enough resources.

Competition from yield-bearing new stablecoins & payment giants like Stripe

Ethena (USDe), Sky, and other new stablecoins capture market share by paying yields directly to holders. Circle is constrained by its regulatory-compliance positioning, and currently cannot pay yields directly to USDC holders.

Stripe is a founding member of the x402 Foundation, while also building its own stablecoin payments system. Stripe’s strategy is to connect to every standard that could win—its involvement doesn’t imply exclusive support for USDC, and it doesn’t rule out Stripe launching its own stablecoin later or deeply integrating USDT.

9. Conclusion

Circle isn’t a company that is “certain to become” a trillion-dollar business. But it could be one of the few fintech companies today that has structural conditions enabling it to touch that ceiling.
The current valuation almost only reflects USDC interest income. The market is asking: Is Circle truly an interest-rate-driven financial company, or a fee-based digital dollar infrastructure? The answer isn’t settled yet—but the data is leaning toward the latter.

The core things to track are three: whether USDC circulating supply is growing, whether each dollar of USDC is being used more frequently, and whether non-interest revenue is getting bigger. When all three improve at the same time, the transition is happening.

Data sources: Circle IR, SEC EDGAR, DefiLlama, Visa Onchain Analytics, Artemis Terminal, CoinDesk, Mizuho Research

Disclaimer: This article does not constitute investment advice. All data is current as of April 2026.