Circle Sprints IPO, Coinbase Lays to Earn 50%: A Win-Win Game for Stablecoins
Author: Sebastian Sinclair
Compiler: Deep Tide TechFlow
Jeremy Allaire, CEO of Circle, spoke at Converge 2022
Image Source: Nikhilesh De/CoinDesk (CC BY 2.0)
According to Circle's latest IPO filing, Coinbase receives half of the remaining revenue from Circle's USDC reserves, further deepening the bond between the two crypto giants.
Coinbase received 50 percent of the "residual payment base" — a portion of the revenue that comes explicitly from a 1-to-1 reserve of the dollar, Circle's flagship stablecoin (USDC), which is backed by the U.S. dollar, according to the filing.
Circle's revenue is primarily derived from reserve assets, which are essentially made up of highly liquid U.S. Treasuries and cash equivalents.
In 2024, Circle's revenue and reserve earnings totaled $1.7 billion and reported a net income of $156 million. Circle said it is committed to capitalizing on the growing popularity of blockchain payments around the world to further expand its business.
Symbiotic relationship: USDC is deeply bound to Coinbase
The filing states that Coinbase's share of Circle Reserve revenue is directly related to the amount of USDC held on the Coinbase platform.
If more USDC is stored on the Coinbase platform, the proportion of reserve income shared by the exchange will increase; Conversely, if users hold USDC directly through Circle or other platforms, Coinbase's revenue share will be reduced.
The revenue-sharing agreement further underscores a well-known point in the industry – the symbiotic relationship between Circle's USDC and Coinbase. As USDC's largest distribution partner, Coinbase has had a significant impact on Circle's revenue stream.
USDC is the second largest stablecoin in the world, with a circulation of about $60.1 billion, accounting for about 26% of the global stablecoin market (data source: CoinGecko).
The stablecoin was jointly launched by Circle and Coinbase in 2018 through the Centre Alliance, and after the alliance dissolved in 2023, Coinbase acquired an equity stake in Circle in August of the same year.
In 2024, the amount of USDC held on the Coinbase platform accounted for about 20% of the total circulation, a significant increase from 5% in 2022, reflecting the growing importance of Coinbase to the Circle revenue stream.
Despite the close partnership, Circle also noted in the filing that such an arrangement could pose potential risks. Circle emphasizes that its distribution costs and revenue share paid to Coinbase are directly affected by Coinbase's business strategies and policies, which are outside of Circle's control.
In an effort to reduce its reliance on Coinbase while countering its main competitor, Tether (USDT), on a global scale, Circle is accelerating the international expansion of USDC. The company has recently partnered with a number of digital finance giants, including Grab in Singapore, Nubank in Brazil and Mercado Libre in Latin America.
Circle plans to list on the New York Stock Exchange under the ticker symbol "CRCL," but pricing details and release date have not yet been disclosed.