Circle callback, is it still worth buying?

Byline: Leo Z

Can Circle transition from an “interest-eating stablecoin company” into a global digital dollar infrastructure?

1. What is Circle

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

Circle’s revenue sources are straightforward: it invests these reserves in Treasuries and earns the spread. In 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.

The market’s valuation of Circle is basically: “USDC circulating supply × interest rate × a conservative multiple.” This means: if you believe Circle is only an interest-eating company, the current valuation is roughly reasonable. If you believe it is turning into a fee-based digital dollar infrastructure network, the current price still hasn’t reflected this value.

The question this article aims to answer is: Is the transition happening? How much evidence is there? And what is it worth?

2. Core question: is USDC being “held” or being “used”?

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

With the same $77 billion of USDC, if institutions are only storing it to earn the spread, then Circle is an interest-rate-sensitive financial company, valued at 10–15x. If it is being frequently used for payments, settlement, cross-border transfers, and developers calling it, then 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 transaction volume far outpaces the growth rate of circulating supply. In FY2025, circulating supply grew 72%, but on-chain transaction volume grew 247%. This means each dollar of USDC is being used more frequently. This isn’t “the stock is getting bigger,” it’s “the velocity is increasing.”

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

This gap by itself is the strongest signal: USDC is shifting from “an asset people hold” to “a network people use.” But this transition hasn’t been completed yet—what conditions it needs to confirm this will be discussed later.

3. A three-layer revenue structure

Circle’s revenue comes in three layers. The market is currently pricing 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 its current 95% of revenue. By the end of 2025, USDC’s circulating supply is $75.3 billion, up 72% year over year, far exceeding Circle’s own 40% annualized growth target.

The revenue logic is very simple: about 80% of 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

The Q4 2025 reserve yield is 3.81%, down 68 basis points from the prior quarter. This exposes the core contradiction: circulating supply is growing rapidly, but interest rates are falling—so the two are offsetting each other. If the Fed’s target rate falls to 3%, Circle would need USDC to grow to more than $150 billion in order to maintain its current revenue level.

Structural issue: Coinbase takes most of the income. 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 went to distribution partners.

The good news is that profit margins are improving. The RLDC (Revenue Less Distribution Costs) margin expanded from 30.0% in Q4 2024 to 40.1% in Q4 2025. The net income margin is 1.2–1.8% after excluding Coinbase 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 banks, payment companies, and enterprises with 7×24 cross-border settlement based on USDC. As of February 2026, annualized TPV reached $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 with the global cross-border payments market of $16 trillion is still less than four one-thousandths. CPN’s value is not its current size—it’s whether growth can be sustained. If it can capture 1% of the cross-border market, that’s $160 billion in annualized transaction volume. The resulting fees could be close to, or even exceed, interest income—and they would not be affected by interest rates.

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

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

This portion of revenue is not affected by interest rates, and it also does not require a Coinbase revenue share. When it exceeds 10% of total revenue, the market may start using different valuation methods to look at Circle. Currently, it’s about 4%.

Third layer: settlement platform—long-term potential

Arc is Circle’s planned institutional settlement chain to launch its mainnet in 2026. USDC serves as the native gas token. The testnet has already processed more than 166 million transactions, with a confirmation time of 0.5 seconds, and participation from 100+ institutions (including Goldman Sachs and Mastercard).

Arc’s roadmap is divided into four stages:

M1 public testnet (completed) → M2 real funds on-chain (2026) → M3 margin/collateral/settlement scenarios implemented (2027–28) → M4 written into institutional standard operating procedures (2029–30)

Before M2, Arc has no value. But if it ultimately becomes the institutional settlement standard, Circle’s value would no longer be “a fees-from-interest company,” but “a platform company.” This is a necessary condition for returns of 10x or more.

4. Determining whether the transition is happening: seven dimensions

It’s easy to misjudge by looking at any single metric. The key is to see 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. The three most important tracking metrics

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 a period-end snapshot. Currently about $77 billion.

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

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

Answer the core question: is USDC being used or being held. Supply represents only 25%, but adjusted transaction volume represents 64%—each dollar of USDC is doing 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 metric that can directly prove Circle is making money beyond interest. Not affected by interest rates, and no Coinbase revenue share is required. Currently $37 million per quarter, with guidance of $150–170 million (2026). Once it breaks above 10% of total revenue, the valuation method will change.

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

6. Recent catalysts

🔑 Coinbase revenue-sharing agreement expires (August 2026)

This is the biggest single catalyst within the next 24 months. Currently, Circle shares roughly 60% of revenue with partners. If, after renegotiation, the RLDC profit margin rises from 40% to 50–55%, the effect is equivalent to instantly adding 25–35% in profit. But Coinbase has no incentive to concede significantly—distribution of USDC on the Coinbase platform remains Circle’s biggest growth engine. The outcome is uncertain, but the probability of the direction being better than the current situation is higher.

OCC national trust bank license

Conditionally approved in December 2025. Full approval would mean: it can open an account directly at the Federal Reserve (earning IORB interest, eliminating counterparty risk), bypass commercial banks for processing the annual $4830 billion minting/redemption flows, and build an insurmountable trust barrier for enterprises and governments to adopt USDC. No other stablecoin issuer has this.

x402 Foundation (established April 2026)

Coinbase contributed the x402 payment protocol to the Linux Foundation. x402 activates HTTP 402 status codes into an internet-native payments layer, enabling 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 payment standard for AI agents, every machine-to-machine microtransaction will increase USDC usage (velocity) without needing to increase holdings (supply).

Note: x402 is Coinbase-led, not Circle-led. Impact on CRCL: mildly bullish—expands USDC usage scenarios, but does not change the fundamental scale.

7. Conditions for 5–10x returns

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

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

10x (requires multiple conditions to be met at the same time)

From $15–20B to $150–200B, all of the following must happen simultaneously:

CPN TPV breaks above $1000B within 2–3 years, and at least one major corridor enters formal production

2. Improvement in the Coinbase revenue-sharing agreement, and the RLDC profit margin reaches 50%+

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

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

Of these four conditions, currently only the second (profit margin) is clearly improving. 10x is a position you “earn,” not a position you “bet on.”

8. Main risks

Interest rate declines faster than USDC growth

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

Tether regulation/compliance process

USDC’s biggest differentiating 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 comprehensive audit. If Tether obtains compliance status within 2–3 years, USDC’s differentiation advantage would be greatly weakened. USDT currently has a market share of over 60% and a market cap of $1830B—it has sufficient resources.

Yield-generating new stablecoin competition & payments giants like Stripe

New stablecoins such as Ethena (USDe) and Sky grab market share by paying yields directly to holders. Circle is constrained by its regulatory-compliant positioning, and currently cannot pay interest directly to USDC holders.

Stripe is a founding member of the x402 Foundation and is also building its own stablecoin payments system. Stripe’s strategy is to integrate every standard that could win—its participation does not mean exclusive support for USDC, and it does not rule out Stripe launching its own stablecoin in the future or deeply integrating USDT.

9. Conclusion

Circle is not a company that is “certain to become a trillion-dollar” business. But it could be one of the few fintech companies currently with structural conditions that can actually touch this ceiling.

The current pricing almost exclusively reflects USDC interest income. The market is asking: Is Circle truly an interest-rate-driven financial company, or is it a fee-based digital dollar infrastructure? The answer is not yet certain—however, the data is increasingly pointing 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 revenue beyond interest 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 as of April 2026.