Circle, the company behind the $60 billion $USDC stablecoin, has filed a preliminary prospectus for its upcoming IPO. The filing reveals impressive 2024 revenue of nearly $1.7 billion but a relatively modest operating income of $167 million. While Circle’s spending is far from frugal, a major factor weighing down profits is its costly arrangement with Coinbase, which formerly held a 50% stake in USDC.
Circle spent over $1 billion on distribution in 2024, most of which went to Coinbase. The concern now is whether this deal will restrict Circle’s future flexibility.
Even as competition intensifies, USDC remains the top regulated stablecoin, presenting a wealth of growth opportunities. Notably, in late 2024, as reported by BitKE, Circle entered a strategic partnership with Binance. However, the deal involved a significant upfront cost – specifically, a $74.1 million increase in “other distribution incentive costs,” attributed in part to this new arrangement with Binance.
PARTNERSHIP | @circle Partners with @binance to Accelerate Global $USDC Adoption Across the Binance Ecosystem
Through the partnership, Binance will make USDC more extensively available across their full suite of products and serviceshttps://t.co/7p7xJvkp0P pic.twitter.com/SUZiww03pw
— BitKE (@BitcoinKE) December 13, 2024
Though stablecoins are still tightly coupled with the crypto ecosystem, USDC is well positioned to lead the adoption of tokenized assets and money market funds in traditional finance. A key use case lies in using tokenized assets as collateral. Circle recently acquired Hashnote, a tokenized treasury firm offering the yield-bearing USYC fund. It also struck a deal with ICE, the parent company of the NYSE. The prospectus emphasizes how combining USDC with a money market fund enables instant redemption of tokenized assets – an edge we’ve highlighted before.
Critics may note that USYC has slipped from its leading position among tokenized MMFs since the acquisition, with assets under management nearly halved, pushing it down to third place. This was anticipated, given that 97% of USYC was used as collateral for the Usual stablecoin at the time of acquisition – Usual had already planned to diversify. Regardless, the combination of USYC and the ICE partnership remains strategically significant.
Originally, $USDC was governed by the Centre Consortium, formed by Circle and Coinbase, with plans to include other members. That never materialized, and in 2023, Circle assumed full control, dissolving the Consortium.
Unpacking the Coinbase Ties
While the prospectus doesn’t spell out every detail, it does share key aspects of the Coinbase deal, though interpreting them requires effort. Circle paid $209.9 million in stock – about 8.4 million shares – to acquire Coinbase’s stake in Centre. The revenue-sharing arrangement that followed is complex.
Circle takes a small initial cut to cover essential costs. Revenues are then divided based on the $USDC held in custodial wallets by each company. Beyond that, Coinbase receives 50% of revenues from $USDC held elsewhere. Notably, Coinbase’s share of USDC grew from 5% in 2022 to 20% in 2024, driving up Circle’s distribution costs.
We’ve previously reported on newer stablecoins like the Global Dollar and M, which distribute revenue to partners. Circle’s hands are tied by its deal with Coinbase, limiting its ability to do the same – at least until 2029. The prospectus outlines a three-year initial term, with an option to renew for another three. Whether the agreement continues rolling thereafter is unclear, though it includes termination clauses. However, Coinbase is unlikely to terminate unless it decides to launch a competing stablecoin.
“payments giant @theflutterwave – valued at $3bn – showcased their $USDC merchant settlement solution built on #Hedera…” LIST | Here Are the 28 Leading African Fintechs Partnering with Circle in New Stablecoin Network – https://t.co/Ti6GQHk8nq
— Apollo (@Apollo19681011) April 25, 2025
Looking at the Binance deal, questions remain.
What does Circle get in return for the substantial upfront payment?
Can Binance pursue similar arrangements that involve revenue sharing?
Binance currently holds nearly $38 billion in stablecoins:
$30.7 billion in Tether’s USDT
$5.5 billion in USDC, and
$1.67 billion in FDUSD
It reportedly holds $2 billion of its own reserves in USDC compared to $1.3 billion in Tether. If Binance could earn 2% annually on its holdings, it could be looking at $750 million in revenue.
Could Equity Have Been a Better Deal for Coinbase?
In hindsight, both companies might have fared better financially had Coinbase opted for a significant equity stake instead of a revenue cut. Circle’s valuation would likely be higher. However, equity ownership could have posed strategic complications – especially for deals with other exchanges – and raised concerns about stock dilution. One alternative might have been to issue a special class of shares and divest them during the IPO. Given the sophistication of both firms, such possibilities were no doubt considered.
Still, it’s hard to ignore the disparity: Circle reported net income of $156 million last year, while Tether earned $12 billion. Tether takes on more risk – arguably too much for a stablecoin – but even projecting Circle’s revenue model onto Tether’s scale suggests potential revenues of $5.6 billion. Tether operates with fewer than 100 employees, whereas Circle employs around 900. A more conservative version of Tether might still have earned $4.5 to $5 billion in 2024.
Without the burden of the Coinbase agreement, Circle’s results this year could have looked very different. The company stands at a crossroads – facing immense opportunity, but with a constrained bottom line. The central question now is whether the Coinbase deal will bind Circle beyond its initial six-year term.
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