Circle IPO Interpretation: The rise potential behind the low Intrerest Rate

Circle chose to go public during the industry's accelerated clearing stage, hiding a seemingly contradictory yet imaginative story—net interest rates continue to decline, yet there remains enormous growth potential. On one hand, it has high transparency, strong regulatory compliance, and stable reserve income; on the other hand, its profitability appears surprisingly "mild"—with a net interest rate of only 9.3% in 2024. This apparent "inefficiency" does not stem from a failure of the business model; rather, it reveals a deeper growth logic: amidst the backdrop of gradually fading high interest rate dividends and a complex distribution cost structure, Circle is building a highly scalable, compliance-first stablecoin infrastructure, with profits strategically "reinvested" into market share enhancement and regulatory leverage. This article will trace Circle's seven-year journey to public listing, analyzing its growth potential and capitalization logic behind its "low net interest rate" from corporate governance, business structure to profitability model.

1 Seven-Year Public Listing Marathon: A History of the Evolution of Cryptocurrency Regulation

1.1 Paradigm Shift of the Three Capitalization Attempts (2018-2025)

The journey of Circle's IPO can be described as a living specimen of the dynamic game between cryptocurrency enterprises and regulatory frameworks. The initial IPO attempt in 2018 coincided with a period of ambiguity regarding the classification of cryptocurrencies by the SEC. At that time, the company formed a "payment + trading" dual-drive model through the acquisition of an exchange, securing $110 million in financing from several well-known institutions. However, the regulatory scrutiny over the compliance of exchange operations and the sudden impact of the bear market led to a 75% drop in valuation from $3 billion to $750 million, exposing the fragility of early cryptocurrency companies' business models.

The SPAC attempts in 2021 reflect the limitations of regulatory arbitrage thinking. Although merging with a company can circumvent the strict scrutiny of traditional IPOs, the SEC's inquiries into the accounting treatment of stablecoins hit the nail on the head—requiring Circle to prove that USDC should not be classified as a security. This regulatory challenge led to the collapse of the transaction but unexpectedly pushed the company to complete a critical transformation: divesting non-core assets and establishing "stablecoin as a service" as the strategic focus. From that moment until today, Circle has fully committed to building USDC compliance and is actively applying for regulatory licenses in multiple countries worldwide.

The IPO options in 2025 mark the maturation of the capitalization path for crypto enterprises. Listing on the NYSE not only requires compliance with the full disclosure requirements of Regulation S-K but also subject to internal control audits under the Sarbanes-Oxley Act. Notably, the S-1 filing disclosed for the first time the reserve management mechanism: out of approximately $32 billion in assets, 85% is allocated through an overnight reverse repurchase agreement via a certain asset management company's Circle Reserve Fund, and 15% is held in systemically important financial institutions like Bank of New York Mellon. This transparent operation effectively constructs an equivalent regulatory framework to that of traditional money market funds.

1.2 Cooperation with a certain trading platform: from ecological co-construction to subtle relationships

As early as the launch of USDC, the two cooperated through the Centre alliance. When the Centre alliance was established in 2018, a certain trading platform held 50% of the shares and quickly opened up the market through a "technology output in exchange for traffic entrance" model. According to Circle's IPO documents disclosed in 2023, it acquired the remaining 50% equity of the Centre Consortium from a certain trading platform for $210 million in stocks, and the profit-sharing agreement regarding USDC was also renegotiated.

The current revenue-sharing agreement is based on the terms of a dynamic game. According to the S-1 disclosure, the two parties share revenue based on USDC reserve income at a certain ratio. The text mentions that a certain trading platform shares about 50% of the reserve income, and the sharing ratio is related to the amount of USDC supplied by that platform. Public data from a certain trading platform indicates that in 2024, the platform holds about 20% of the total circulating USDC. This trading platform, with a 20% supply share, has taken approximately 55% of the reserve income, which poses some hidden risks for Circle: as USDC expands outside of that platform's ecosystem, the marginal cost will rise non-linearly.

2 USDC Reserve Management and Equity and Shareholding Structure

( 2.1 Reserve Fund Tiered Management

The reserve management of USDC shows a clear characteristic of "liquidity layering":

• Cash ) 15% ###: deposited in GSIBs such as Bank of New York Mellon to cope with sudden redemptions.
• Reserve Fund ( 85% ): Allocated by Circle Reserve Fund managed by a certain asset management company.

Starting from 2023, the USDC reserves are limited to cash balances in bank accounts and Circle reserve funds. Its asset portfolio mainly includes U.S. Treasury securities with remaining maturities not exceeding three months and overnight U.S. Treasury repurchase agreements. The dollar-weighted average maturity of the asset portfolio shall not exceed 60 days, and the dollar-weighted average duration shall not exceed 120 days.

( 2.2 Equity Classification and Layered Governance

According to the S-1 filing submitted to the SEC, Circle will adopt a three-tier equity structure after going public:

• Class A shares: Common stock issued during the IPO process, each share carries one vote.
• Class B shares: Held by the co-founders, each share has five votes, but the total voting power is capped at 30%, ensuring that the core founding team still retains decision-making authority even after the company goes public.
• Class C shares: no voting rights, convertible under certain conditions, ensuring that the company's governance structure complies with the rules of the New York Stock Exchange.

The equity structure aims to balance public market financing with the stability of the company's long-term strategy, while ensuring the executive team maintains control over key decisions.

) 2.3 Distribution of Executive and Institutional Shareholdings

The S-1 filing discloses that the executive team holds a significant amount of shares, while several well-known venture capital and institutional investors each hold more than 5% of the equity, with these institutions collectively holding over 130 million shares. An IPO valued at $5 billion can bring them substantial returns.

![Circle IPO Analysis: Growth Potential Behind Low Intrerest Rate]###https://img-cdn.gateio.im/webp-social/moments-bd15829dda1a8f869614d355f24ddc1b.webp###

3 Profit Models and Revenue Breakdown

( 3.1 Revenue Model and Operational Indicators

• Source of Income: Reserve income is the core source of revenue for Circle. Each USDC token is backed by an equivalent amount of USD, and the reserve assets mainly include short-term U.S. Treasury bonds and repurchase agreements, generating stable interest income during high interest rate cycles. According to S-1 data, total revenue for 2024 is projected to reach $1.68 billion, of which 99%) approximately $1.661 billion### comes from reserve income.
• Revenue sharing with partners: The cooperation agreement with a certain trading platform stipulates that the platform receives 50% of the reserve income based on the amount of USDC held, resulting in relatively low income actually attributable to Circle, which has dragged down net profit performance. Although this sharing ratio has impacted profits, it is also a necessary cost for Circle to build an ecosystem with partners and promote the widespread application of USDC.
• Other income: In addition to reserve interest, Circle also increases revenue through enterprise services, USDC Mint business, and cross-chain fees, but the contribution is small, only $15.16 million.

( 3.2 Income rise and profit contraction paradox ) 2022-2024 ###

There are structural causes behind the apparent contradictions:

• Converging from multi-core to single-core: From 2022 to 2024, Circle's total revenue rose from $772 million to $1.676 billion, with a compound annual growth rate of 47.5%. Among them, reserve income has become the company's core source of revenue, with its revenue share rising from 95.3% in 2022 to 99.1% in 2024. This increase in concentration reflects the successful implementation of its "stablecoin as a service" strategy, but it also means that the company's dependence on macro Intrerest Rate changes has significantly increased.

• Distribution expenses surge compressing gross profit space: Circle's distribution and transaction costs have significantly increased over three years, rising from $287 million in 2022 to $1.01 billion in 2024, a rise of 253%. These costs are primarily used for the issuance, redemption, and payment settlement system expenses of USDC. As the circulation of USDC expands, this expense grows rigidly.

Due to the inability to significantly compress these costs, Circle's gross margin quickly fell from 62.8% in 2022 to 39.7% in 2024. This reflects that while its ToB stablecoin model has scale advantages, it will face systemic risks of profit compression during a declining Intrerest Rate cycle.

• Profitability has turned from loss to profit but the growth is slowing: Circle officially turned a profit in 2023, with a net profit of $268 million and a net profit margin of 18.45%. Although the profit trend continues in 2024, after deducting operating costs and taxes, the disposable income is only $101,251,000. Adding the non-operating income of $54,416,000, the net profit is $155 million, but the net profit margin has declined to 9.28%, a year-on-year decrease of about half.

• Cost Rigidity: It is worth noting that the company's investment in general administrative expenses (General & Administrative) in 2024 will reach 137 million USD, a rise of 37.1% year-on-year, marking three consecutive years of growth. According to its S-1 disclosure, this expenditure is primarily used for global license applications, audits, and the expansion of legal compliance teams, which confirms the cost rigidity brought about by its "compliance-first" strategy.

Overall, Circle completely broke away from the "exchange narrative" in 2022, achieved a profitability turning point in 2023, successfully maintained profits in 2024 but with a slower growth rate, and its financial structure has gradually aligned with traditional financial institutions.

However, its revenue structure is highly dependent on the interest rate spread of U.S. Treasury bonds and trading volume, which means that any downturn in interest rates or a slowdown in USDC growth will directly impact its profit performance. In the future, Circle needs to seek a more stable balance between "cost reduction" and "growth" to maintain sustainable profitability.

The deep-rooted contradiction lies in the defects of the business model: when USDC's attributes as a "cross-chain asset" enhance the on-chain transaction volume of ( to 20 trillion USD in 2024, its currency multiplier effect instead weakens the profitability of issuers. This is akin to the predicament faced by traditional banking.

![Circle IPO Analysis: Growth Potential Behind Low Intrerest Rate])https://img-cdn.gateio.im/webp-social/moments-d232d71fd4e9a2b14fbee1e38c9ce350.webp(

) 3.3 rise potential behind low Intrerest Rate

Despite Circle's net interest rate being under pressure due to high distribution costs and compliance expenses, with a net profit margin of only 9.3% in 2024, a year-on-year decline of 42%, its business model and financial data still hide multiple rise drivers.

• The continuous increase in circulation drives stable rise in reserve income:

According to the data from the data platform, as of early April 2025, the market value of USDC has surpassed 60 billion USD, second only to USDT's 144.4 billion USD; by the end of 2024, USDC's market share has risen to 26%. On the other hand, the market value of USDC in 2025 continues to maintain strong momentum. The market value of USDC has increased by 16 billion USD in 2025. Considering that its market value was less than 1 billion USD in 2020, the compound annual growth rate (CAGR) from 2020 to early April 2025 has reached 89.7%. Even if the growth rate of USDC slows down in the remaining 8 months, its market value is still expected to reach 90 billion USD by the end of the year, and the CAGR will rise to 160.5%. Although reserve income is highly sensitive to Intrerest Rate, low Intrerest Rate may stimulate USDC demand, and strong scale expansion can partially offset the downside risks of Intrerest Rate.

• Structural optimization of distribution costs: Although a high commission will be paid to a certain trading platform in 2024, this cost is non-linearly related to the growth in trading volume. For instance, the collaboration with a certain platform only incurs a one-time fee of $60.25 million, which drives its platform USDC supply from $1 billion to $4 billion, significantly lowering the customer acquisition cost compared to a certain trading platform. Combined with the partnership plan between Circle and this platform mentioned in the S-1 filing, it can be expected that Circle will achieve market value growth at a lower cost.

• Conservative valuation does not price market scarcity: Circle's IPO valuation is between $4 billion and $5 billion, based on an adjusted net profit of $200 million, resulting in a P/E ratio of 20~25x. This is similar to traditional payment companies like PayPal###19x( and Square)22x(, seemingly reflecting the market's positioning of "low growth stable profit." However, this valuation system has not fully priced its scarcity value as the only pure stablecoin target in the US stock market; unique targets in segmented tracks typically enjoy valuation premiums, which Circle has not accounted for. At the same time, if stablecoin-related legislation is successfully implemented, offshore issuers will need to significantly adjust their reserve structures, while the existing.