Circle (NYSE: CRCL), the first stablecoin issuer to go public, made its debut on the New York Stock Exchange on June 5, 2025, priced at $31 per share. In a stunning rally, the stock surged to a high of $299 within just 12 trading days.
As of the July 18th closing bell, CRCL was trading at $223.78, reflecting a staggering 622% increase from its IPO price, and a market capitalization nearing $50 billion. While the stock has retreated 25% from its peak, significant risks remain for investors.
Stablecoins: The Digital Proxy for Fiat Currency
Stablecoins are cryptocurrencies designed to maintain a stable value by being pegged to a reserve asset like a fiat currency. Think of them as digital receipts for traditional currencies.
American Depositary Receipts (ADRs) offer a helpful analogy. ADRs allow U.S. investors to trade shares of foreign companies on domestic exchanges. For example, an Alibaba ADR represents one ordinary share, while a Baidu ADR represents eight.
Here’s how the stablecoin model mirrors aspects of the ADR structure:
First, they both issue ownership certificates. ADRs grant holders rights associated with the underlying stock, like dividends and voting. Stablecoin issuers provide digital tokens representing a claim on a pool of reserve assets, such as fiat currency or government bonds.
Second, they utilize two-tiered intermediary structures. ADRs are issued by depositary banks, who hold the underlying shares in custody with保管 banks. Stablecoins require collaboration between issuers (like Tether or Circle) and托管方(custodians like BlackRock) to back the tokens and manage the reserves.
Third, both serve as vehicles to bypass regulatory hurdles. ADRs allow American investors to invest in non-U.S. companies despite legal restrictions. Stablecoins allow users to hold and transact in fiat currencies (USD, EUR, HKD) without needing a traditional bank account.
Fourth, they rely on a pegging mechanism. ADRs are tightly coupled to the underlying stock price, and compliant stablecoins aim for a 1:1 backing by reserve assets.
Despite these similarities, the key difference lies in their fundamental nature. ADRs are proxies for equity securities, while stablecoins are intended as digital representations of currency. This distinction is crucial as evidenced by the recent passage of the “Clarity for Payment Stablecoins Act” in the U.S. Congress, which explicitly classifies stablecoins as “payment instruments,” not securities, commodities, or investments.
Alongside the stablecoin bill, the “Anti-CBDC Act” was also passed, effectively banning the issuance of a central bank digital currency (CBDC) in the United States – a stark contrast to China’s aggressive push for its digital Yuan (which *is* the fiat currency itself, not a derivative).
Circle’s Rollercoaster Ride: From Boom to Bust and Back?
Founded in 2013 and headquartered in Boston, Circle initially focused on Bitcoin payments and cross-border money transfers. Early funding rounds included $26 million in Series A and B. A Series D round in 2016 was led by IDG Capital, with participation from Goldman Sachs and Baidu, followed by an investment from China Everbright Holdings in a 2018 Series E round.
The game-changer for Circle came in 2018 with the launch of USDC in partnership with Coinbase. Positioning itself as a more transparent alternative to USDT, USDC aimed to win market share through 1:1 USD reserve backing and monthly audits.
In 2022, Circle issued $167.61 billion worth of USDC and redeemed $165.47 billion, resulting in a net issuance of $2.14 billion. The year-end circulating supply stood at $44.55 billion (Circulating Supply = Issuance – Redemption).
2023 saw a reversal of fortune, with issuances of $95.83 billion and redemptions reaching $115.98 billion, leading to a net redemption of $20.14 billion and a year-end circulation of $24.41 billion.
The collapse of Silicon Valley Bank in March 2023, where Circle held $3.3 billion in deposits, caused a significant crisis. USDC briefly de-pegged, falling over 12% to a low of $0.878 on March 11th. While the peg was swiftly restored, the event shook user confidence, leading to an almost 50% drop in USDC’s circulating supply by the end of the year.
Confidence remained fragile in Q1 2024, with issuances of $32.15 billion and redemptions of $24.14 billion, resulting in a small net increase of $8 billion.
The final three quarters of 2024 marked USDC’s true resurgence, with total issuances reaching $141.34 billion and a net increase in circulating supply of $19.44 billion, culminating in a total of $43.86 billion.
In Q1 2025, the momentum continued with issuances of $53.22 billion and redemptions of $37.1 billion, boosting circulating supply by $16.12 billion to $60 billion.
Between January 1, 2021, and March 31, 2025, total USDC issuances reached $558 billion, with redemptions totaling $502 billion, exceeding a combined $1 trillion.
As of June 2025, USDC’s circulating supply was approximately $61 billion, grabbing roughly 25% of the market share, second only to Tether’s USDT, which boasts around $150 billion in circulation and a commanding 62% market share.
Beyond the purview of most in the world, stablecoin trading volumes have exploded:
In 2024 alone, stablecoin transaction volume reached a staggering $15.6 trillion, surpassing both Visa and Mastercard!
Circle’s filing documents reveal that its total transaction volume for Q1 2025 reached $6 trillion. Since its inception, USDC has processed over $25 trillion in transactions.
In July 2025, USDC and USDT recorded average daily (24-hour) trading volumes of $60 billion and $120 billion, respectively. Annualized, the trading volume of these two dominant players alone reaches $70 trillion!
To put this in perspective, total bank card transactions in China amounted to 992.5 trillion in 2024.
The stablecoin market’s incredible growth equates to roughly half the total bank card transaction in China.
Circle: The Teacher’s Pet?
Circle, while smaller than Tether, has gotten the jump on the competition by embracing regulatory compliance and cultivating a friendly relationship with regulators. Circle is playing by the rules.
This “good student” approach is evident in two key areas:
First, actively pursuing licenses. Circle has secured licenses for payments and digital assets in multiple jurisdictions, including the U.S., the U.K., the EU (MiCA compliant), and Singapore.
Second, ensuring transparency. Circle maintains 100% reserve backing in cash and short-term U.S. government bonds, with monthly audits by firms like Deloitte (following AICPA standards). Users can verify this information online in real time.
Tether, in contrast, operates offshore, having moved its headquarters to El Salvador. More concerningly, its reserve assets include a significant portion of commercial paper – exceeding 60%! This alone makes Tether’s asset security incomparable to Circle’s approach.
USDC is the example of a compliant stablecoin, while USDT has more lax compliance requirements. The recent passage of the “Clarity for Payment Stablecoins Act,” which requires 100% reserves in USD cash and U.S. Treasury bonds, directly benefits USDC and might lead to the delisting of USDT from U.S. exchanges. However, in many regions “outside” U.S. influence, USDT’s non-compliance may be its biggest advantage.
Circle’s Missing Piece: The Unfair Coinbase Deal
Coinbase, founded in May 2012, has evolved from a trading platform into a broader ecosystem, generating $3.99 billion in revenue in 2024.
Coinbase is equally concerned about compliance. Its key qualifications include: U.S. MSB (Money Services Business), U.S. FinCEN (Financial Crimes Enforcement Network), U.S. CFTC (Commodity Futures Trading Commission), U.S. SEC Investment Advisor (Crypto Asset Investment Advisor), and EU MiCA (the highest-level cryptocurrency qualification in the EU).
Coinbase prioritizes regulatory compliance, resulting in higher fees and a smaller selection of supported cryptocurrencies.
Circle and Coinbase were initially symbiotic. In 2018, they co-founded the Centre Consortium, each holding a 50% stake. Circle handled technology development and reserve management, while Coinbase focused on distribution.
In August 2023, Circle acquired the Centre Consortium by exchanging 4% of Circle’s equity.
However, the two companies’ interests remain deeply intertwined. What looked like a partnership now appears more like an exploitative arrangement:
First, Coinbase takes a cut of the reserve asset yield. Coinbase receives a fixed 50% of the total reserve asset return as a distribution fee. If users deposit USDC on Coinbase, Coinbase keeps 100% of the reserve income.
Second, Coinbase is a backup issuer with trademark rights. If Circle defaults (such as not making timely payments), Coinbase has the right to issue USDC!
Third, Coinbase provides additional rewards to hold USDC. Coinbase offers “floating yields” as rewards to users who deposit USDC (~4.1% in 2025).
Fourth, Coinbase has additional protections in the even Circle de-pegs. When Circle experiences a de-pegging crisis, users who store USDC on Coinbase are given priority compensation.
With higher returns and stronger protections, Coinbase’s ownership stake in USDC increased from 5% to 20% in 2024 alone, rising to 23% in Q1 2025.
Circle, with no distribution/trading capabilities and reliance on partners like Coinbase, is incomplete.
The Bad News: Interest Rate Cuts
Circle generates most of its revenue from investment returns on its reserve assets, primarily through interest on short-term U.S. Treasury bonds.
In 2023, reserve asset yields amounted to $1.43 billion, representing 98.6% of total revenue.
In 2024, reserve asset yields were $1.66 billion, accounting for 99.1% of revenue.
In Q1 2025, reserve asset yields were $560 million reaching 96.4 % of revenue.
USDC’s circulating supply approximates Circle’s interest-bearing assets. These numbers can be used to calculate the reserve asset yield.
In 2022, the USDC’s average circulating supply was $49.86 billion yielding $740 million with a 1.5% yield.
In 2023, the USDC’s average circulating supply fell to $30.47 billion, but yields increased to $1.43 billion for a 4.7% yield.
In 2024, the USDC’s average circulating supply gradually increased to $33.34 billion to yield $1.66 billion with a 5% yield.
In Q1 2025, the USDC’s average circulating supply was $54.14 billion yielding $560 million with a 4.2% annualized yield.
In 2022, the yields on short-term U.S. debt reached 4.7%, but Circle’s reserve assets yielded just 1.5%, suggesting approximately two-thirds of the reserve assets were non-yielding cash.
In 2023 and 2024, reserve asset yields tracked U.S. Treasury yield rates, indicating that a large majority of reserve assets were bonds and that only a small portion was held as cash.
As of March 2025, the USDC’s circulating supply was $60 billion. Every one percentage point interest drop would translate to a $600 million drop in annual yield.
The Bad News: Coinbase is taking a larger cut.
Even worse, if the Federal Reserve cuts rates, Coinbase will take more of the profit.
In 2022, Circle’s distribution and trading costs were $290 million accounting for 39% of its investment income.
In August 2023, Coinbase started increasing its cut, and distribution and trading costs jumped to $720 million accounting for 50.3% of its investment yield. During the same timeframe, Circle’s net profits plummeted to $272 million.
In 2024, distribution and trading costs exceed $1 billion (Coinbase earned ~$908 million from this transaction), accounting for 60.9% of investment yield. During this time, Circle’s net profits decreased to $157 million.
In 2025 Q1, distribution and trading costs were $350 million accounting for 62.33% of investment yield, During this timeframe, net income stood at $64.79 million.
Rumor has it that Coinbase will increase its portion of Circle’s reserve assets from 50% to 70%.
Coinbase is quickly strangling Circle even harder. It used to ask for money, but now Coinbase wants everything!
Bad News: Market competition: Big Tech could push CIRCLE out of the Market.
1) The U.S. Doesn’t Like Stablecoins
The greatest threat in the advancement of fintech is the existing establishment. There are always winners and losers.
Circle’s mission is “[to enable] Frictionless exchange of value.”, and “Frictionless” directly calls out SWIFT’s high fees.
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a telecommunications system connecting 11,000 financial institutions in +200 countries. According to the World Bank, SWIFT’s fees contribute directly to a 6.01% remittance fee, described as the “Friction cost.”
SWIFT was developed in 1970, and its technology is outdated relying on paper and outdated process. It takes approximately 2-5 days to complete settlement payments.
Stablecoins directly undermines SWIFT which begs the question; who do you think SWIFT represents?
In addition to extortionist fees, SWIFT which is dominated by Western countries, is often used as a tool to exert influence.
After Russia invaded Ukraine, US sanctioned numerous Russian entitites. The most powerful sanction was kicking Russia out of SWIFT, an action that has been described as a “Finance Nuclear Weapon.”
Stablecoin payments directly bypass SWIFT. This is the exact reason why the US doesn’t not favor stablecoins.
2) [The US wants] More Demand for US Debt.
The US’s 180 is centered on Increasing Demand for US Treasuries. Unfortunately, there is no work around.
There are 2 components:
First, global USD holders have an incentive to convert to stablecoins for safety, convenience, speed, and low costs, like how the Chinese use Mobile Payments. This also applies to countries with no stable financials or wild fluctuations in inflation rates.
Second, stablecoin issuers maintain assets in USD cash & US treasuries.
Bensent (Analyst) estimates that by 2030 stablecoin issuance would grow to $3.7 Trillion with backing in USD and US treasury bonds.
Various finance commentators believe that stablecoins will lead to greater demand for Short term credit. However, for longer term US debt, its much more challenged.
Whether the debt is selling well depends on interest rates:.
2021: 3 month Treasury 0.02-0.06%
2022: 4.7%
2023: 5.4%
2024: 3.36%.
7/11/2025: 3.79% or ~95x higher than the 2021 average.
Debt with a shorter maturity (in this case 3 months) is preferred, because if interest rates are rising, it can be paid off and new more lucrative debt can be issued.
Trump can leverage stablecoins to constantly sell debt. It doesn’t matter whether the debt is short or long term so long as it can get it sold.
Trump is constantly putting pressure on the Federal Reserved to cut rates over concerns of being unable to sell US debt, leaving the Fed to absorb most of its own treasury bonds.
Others argue that US treasury holders would exchange USD for Stablecoin, eliminating all forms of demand, but a treasury holder receives interest and relinquishes liquidity which makes this highly unlikely.
Trump’s alleged “Mar-a-Lago Plan” allegedly incentivizes the trading/purchasing of 100 year zero coupon bonds held by a foreign entity.
However, even Japan (most likely to participate) declined to participate. Now this plan has been dubbed the “Pennsylvania Plan” (US Treasury is located on Pennsylvania Avenue).
The Pennsylvania plan plans to help solve America’ debt crisis through the adoption of stablecoin led by Big Tech conglomerates, Apple and Amazon (AppleUSD/AmazonCoin). This is bad for circle, but it’s particularly good for Tether which is known to skirt the rules.
The biggest bad news about Circle is Low Rates, Coinbase’s larger cut of the pie, and competition. All 3 are challenges.
Original article, Author: Tobias. If you wish to reprint this article, please indicate the source:https://aicnbc.com/5264.html
