The story of Circle and its flagship stablecoin, USD Coin (USDC), is one of resilience, strategic partnerships, and financial innovation in the rapidly evolving world of digital assets. With a circulating supply now exceeding $60 billion, USDC has cemented its position as the second-largest dollar-pegged stablecoin globally. As Circle moves closer to an IPO, its financial disclosures and on-chain data offer a revealing look into how it built this empire—and what lies ahead.
Circle’s Financial Landscape
Circle, founded in 2013, has transformed from a Bitcoin payments startup into a cornerstone of the crypto financial system. After explosive revenue growth in 2021 (450%) and 2022 (808%), the company reported $1.7 billion in revenue for 2024—a 15% year-over-year increase. This marks a shift toward more sustainable expansion following market turbulence, including the fallout from the Silicon Valley Bank collapse in 2023.
However, profitability has taken a hit. Net income dropped 42% to $157 million, while adjusted EBITDA declined 28% to $285 million. A key reason? Over 99% of Circle’s revenue comes from interest earned on its USDC reserves—primarily short-term U.S. Treasuries and cash deposits—making it highly sensitive to macroeconomic conditions.
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Crucially, Circle spent approximately $1.01 billion in distribution costs in 2024—up 40% from 2023 and 150% from 2022. These funds were paid to key partners like Coinbase and Binance (BN) to incentivize USDC adoption across exchanges and ecosystems. While costly, this strategy directly fueled USDC’s supply rebound, which surged 80% to $44 billion during the year before climbing further to $60 billion by early 2025.
On-Chain Growth and Multi-Chain Expansion
USDC was launched in 2018 as a collaboration between Circle and Coinbase. Designed as a fully reserved digital dollar, each USDC token is backed 1:1 by highly liquid assets such as U.S. Treasury bills and regulated cash holdings. This model ensures stability and trust—critical for widespread adoption.
Today, USDC’s total supply stands at around $60 billion, reclaiming approximately 26% of the stablecoin market share after temporary setbacks in 2023. Its presence spans multiple blockchains:
- Ethereum: ~$40 billion (65%)
- Solana: ~$9.5 billion (15%)
- Base (Layer-2): ~$3.75 billion (6%)
- The remainder is distributed across Arbitrum, Optimism, Polygon, Avalanche, and others.
This cross-chain availability reflects Circle’s deliberate interoperability strategy. Powered by tools like the Cross-Chain Transfer Protocol (CCTP), USDC enables seamless value transfer between ecosystems—fueling use cases in payments, DeFi, and global remittances.
On-chain activity confirms growing utility: the 30-day average transfer volume reached $40 billion, with Ethereum and Base accounting for up to 90% of adjusted transfers in early 2025. This surge highlights not just speculative trading but real-world usage as users leverage USDC for fast, low-cost settlements.
Interest Rate Sensitivity and Reserve Composition
Every USDC issued is backed by equivalent reserves managed through the Circle Reserve Fund, an SEC-registered government money market fund advised by BlackRock. As of April 11, about 88% of these reserves were invested in short-duration U.S. Treasuries and overnight repurchase agreements (all maturing within two months), with the remaining 11% held as cash in regulated financial institutions.
In 2024, reserve earnings totaled $1.6 billion—nearly all of Circle’s revenue. Based on average reserve balances of ~$44 billion, this implies an annualized yield of roughly 3.6%. While attractive in a high-rate environment, this also exposes Circle to monetary policy shifts.
According to its S-1 filing, a 1% drop in interest rates could reduce Circle’s stablecoin income by $441 million annually—a material risk that underscores the company’s dependence on macroeconomic trends.
Unlike some competitors such as Ethena or MakerDAO, which share yield with token holders, Circle retains all interest income. This gives it strong profit potential when rates are high but increases vulnerability during downturns.
Distribution Is King: The Role of Exchanges
No discussion of USDC’s growth is complete without acknowledging the pivotal role played by major exchanges—especially Coinbase and Binance.
In 2024 alone:
- Coinbase earned $908 million from USDC-related activities—about 13.8% of its total revenue.
- Under its agreement with Circle, Coinbase receives 100% of interest on USDC held on its platform and 50% of interest generated elsewhere.
- The share of USDC supply held on Coinbase grew from 5% in 2022 to over 20%, meaning a significant portion of yield now flows to the exchange.
To accelerate distribution on Binance, Circle made a one-time payment of $60.25 million, illustrating the aggressive tactics used to expand reach on dominant platforms.
These efforts have paid off:
- On Binance, USDC now accounts for 29% of spot trading volume (~$6.2 billion daily), surpassing FDUSD after its depegging incident.
- On Coinbase, USDC drives nearly 90% of combined USD/USDC spot trading volume.
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This exchange-driven adoption has enhanced liquidity and trust, helping establish USDC as a reliable settlement asset across centralized markets.
Beyond Exchanges: Powering DeFi and Enterprise Use
While exchanges remain critical distribution channels, USDC’s true long-term value lies in decentralized finance (DeFi) and enterprise applications.
Chain-level analysis shows:
- ~$30 billion in USDC is held in external owner accounts (EOAs)—a 66% year-on-year increase—indicating rising individual ownership.
- ~$10 billion resides in smart contracts—a 42% increase—reflecting deeper integration into DeFi protocols.
In lending markets like Aave, Spark, and Morpho, over $5 billion in USDC is locked as collateral**. Meanwhile, protocols like Maker (now Sky) use about **$4 billion in USDC within their peg stabilization modules to back the Dai and USDS stablecoins.
USDC also serves as essential liquidity across decentralized exchanges (DEXs), enabling efficient swaps between assets. Furthermore, with the launch of EURC—a MiCA-compliant euro-backed stablecoin—Circle is expanding into international fiat-pegged tokens, laying the groundwork for a global digital currency infrastructure.
Future Outlook: Diversifying Beyond Interest
Looking ahead, Circle aims to reduce reliance on passive interest income through strategic initiatives:
- Circle Mint: An API-first solution allowing businesses to issue and redeem USDC programmatically.
- Acquisition of Hashnote: Gave Circle control over the largest issuer of tokenized money market funds, opening doors to institutional-grade asset tokenization.
- Expansion into capital markets infrastructure, including blockchain-based settlement systems and programmable commercial paper.
With increasing regulatory clarity—particularly the SEC’s recent stance that stablecoins are not securities—Circle is well-positioned for mainstream adoption. However, competition remains fierce from Tether (USDT) and emerging U.S.-based rivals capitalizing on favorable policy shifts.
Frequently Asked Questions
Q: What backs USDC?
A: Each USDC is backed 1:1 by highly liquid reserves including short-term U.S. Treasuries, overnight repo agreements, and cash held at regulated financial institutions.
Q: How does Circle make money?
A: Nearly all of Circle’s revenue comes from interest earned on USDC reserves. It retains this income rather than distributing it to users.
Q: Is USDC safe during market downturns?
A: Yes. USDC maintains full reserve transparency with monthly attestations and uses low-risk, short-duration assets, minimizing exposure to volatility.
Q: Why does Circle pay exchanges like Coinbase?
A: These payments incentivize wider distribution and deeper integration of USDC across trading platforms, boosting liquidity and adoption.
Q: Can USDC lose its peg?
A: While rare, temporary depegs can occur under extreme market stress. However, robust reserves and redemption mechanisms help restore parity quickly.
Q: What’s next for Circle after the IPO?
A: Circle plans to diversify revenue through tokenized assets, payment infrastructure, and global stablecoin expansion beyond USD.
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As stablecoins evolve from speculative instruments to foundational layers of digital finance, Circle’s journey—from interest dependency to IPO ambitions—offers a blueprint for sustainable growth in Web3. With regulatory tailwinds and expanding use cases in DeFi, payments, and capital markets, USDC is poised to play a central role in the future of global finance.