Stablecoin First Stock Circle: The Infrastructure Beast of Global Financial Internet

Written by: Lawyer Liu Honglin

01 Core Summary: The Infrastructure Moment of Digital Dollar

2025 is not only the year for Circle Internet Group, Inc. (hereinafter “Circle” or “the Company”) to complete its capitalization on the New York Stock Exchange (NYSE), but also a critical turning point in its business narrative from a single “stablecoin issuer” to a “Financial Infrastructure Operating System” (Economic OS) on a global scale. With the full implementation of the global regulatory framework—especially the EU MiCA regulation and the signing of the US GENUIS Act—the digital asset industry is undergoing intense pain and rebirth as it transitions from wild growth to compliance and institutionalization.

Against this grand historical backdrop, Circle, with its years-long commitment to a fully reserved compliance approach, has successfully positioned itself at the nexus of traditional finance (TradFi) and decentralized finance (DeFi). This report believes that Circle’s core value is no longer limited to interest margin income from USDC alone, but lies in the full-stack financial technology stack it is building, which includes the underlying blockchain network (Arc), cross-chain communication protocol (CCTP), and programmable wallet services. This stack aims to solve the fundamental pain point of current internet finance: how to achieve “Internetization” of value transfer—instant, free, and borderless—while maintaining fiat currency stability, just like sending an email.

However, opportunities and risks often coexist. Despite delivering impressive revenue growth of 66% year-over-year in Q3 2025, Circle’s business model still faces profound structural challenges. On a macro level, the global interest rate decline cycle directly suppresses the company’s reliance on reserve interest income; on a micro level, the profit-sharing mechanism with core partner Coinbase will be renegotiated in 2026, akin to a Damocles sword hanging over the company’s profit statement. Additionally, with the entry of payment giants like PayPal and the rise of bank-based “tokenized deposits” such as JPMorgan Chase, Circle must demonstrate that its Arc network can establish sufficient network effects to build a moat, or risk becoming a passive “funds channel.”

02 Capital Market Progress: From Listing Frenzy to Value Reversion

Circle’s listing process itself is a microcosm of the capitalization process in the crypto industry. From early SPAC attempts that failed to the eventual choice of a traditional IPO to list on NYSE, this process not only validated regulators’ initial recognition of the compliant stablecoin business model but also established a paradigm for subsequent crypto companies’ listings.

On June 5, 2025, Circle officially went public at an offering price of $31.00 per share, raising over $1 billion. The first-day market performance was phenomenal, with the stock soaring to $83.23, a 168% increase in a single day, with a market cap surpassing $16 billion instantly. This irrational market frenzy was largely due to the severe lack of high-quality compliant crypto assets in the secondary market. After Bitcoin ETFs were approved, institutional investors urgently sought tools to directly capture stablecoin growth dividends through equity, and Circle, as the then-only “First Publicly Traded Compliant Stablecoin,” naturally enjoyed a significant scarcity premium.

However, the pendulum of the capital market quickly swung from extreme optimism to rational assessment. In the second half of 2025, as the Federal Reserve’s rate cut path became clearer and concerns about Circle’s high distribution costs grew, the stock price began a long process of reversion. Although it once peaked at $250, it subsequently retraced to around $80, reflecting investors’ shift of focus from “crypto narrative” to “financial fundamentals.” The current stock price level essentially represents a market’s dynamic balance after weighing its high-growth network effects against its high-dependency interest income model. The change in institutional holdings also confirms this: long-term funds like Susquehanna (SIG) and Vanguard significantly increased their holdings in Q3 2025, indicating mainstream capital’s recognition of Circle’s long-term value as a financial infrastructure, while early-stage venture capital like General Catalyst reduced holdings as a normal profit-taking move.

03 Product Ecosystem Panorama: Building the “Water, Electricity, Gas” of the Value Internet

Circle’s strategic ambition extends far beyond issuing a single digital currency; it aims to create a complete “Economic Operating System.” This system consists of three interlocking gears: the underlying asset protocol, the transmission protocol, and the upper-layer application services.

3.1 Asset Protocol Layer: Dual-Driven USDC and EURC

The core product, USDC (USD Coin), essentially digitizes the credit of the US dollar. Unlike Tether (USDT), which adopts an offshore opaque reserve model, USDC insists on 100% full reserves, with underlying assets composed of cash and short-term US Treasuries, held in a dedicated fund managed by BlackRock. As of the end of Q3 2025, USDC’s circulation has surged to $73.7 billion, a 108% YoY increase, far exceeding industry average growth. Notably, USDC’s market share in on-chain transaction settlement, DeFi lending collateral, and other high-frequency, high-value scenarios is steadily increasing, gradually encroaching on USDT’s territory.

Meanwhile, EURC (Euro Coin) experienced a historic explosion in 2025. Thanks to the implementation of the EU MiCA regulation, non-compliant stablecoins (like USDT) were forced to exit European exchanges, leaving a huge market vacuum quickly filled by Circle, which holds EMI (Electronic Money Institution) licenses. Data shows that EURC’s circulation and trading activity doubled over the past year, establishing an absolute monopoly position in the euro stablecoin field. This demonstrates that Circle’s “compliance moat” is not empty talk; in a strictly regulated market environment, it can translate into real market share.

3.2 Transmission Protocol Layer: CCTP’s Network Effect

In a multi-chain blockchain world, liquidity fragmentation has been a major pain point. Circle’s Cross-Chain Transfer Protocol (CCTP) creatively solves this problem through a “Burn-and-Mint” mechanism. When a user needs to transfer USDC from Ethereum to Solana, CCTP burns tokens on the source chain and mints an equivalent amount of native tokens on the target chain, rather than locking assets and issuing a mapped token as traditional cross-chain bridges do. This mechanism fundamentally eliminates the security risks associated with hacking cross-chain bridges, enabling seamless roaming of USDC across different blockchain networks. By the end of 2025, CCTP has processed over $126 billion in cross-chain transactions, effectively connecting USDC scattered across isolated “islands” into a unified global liquidity network, greatly enhancing USDC’s network effects.

3.3 Application Service Layer: The Bridge Connecting Web2 and Web3

To lower the entry barrier for traditional enterprises into blockchain, Circle has developed a developer toolkit including programmable wallets and smart contract platforms. This allows Web2 giants like Grab and Mercado Libre to easily integrate USDC payment functions into their existing apps without building complex blockchain infrastructure from scratch. Revenue from this segment exploded over 50 times in 2025. Although its current proportion of total revenue is small, its high-margin SaaS-like nature is key to future valuation multiples.

04 Strategic New Engine: Technical and Business Logic of the Arc Blockchain Network

Launched in October 2025, the Arc blockchain network marks another elevation of Circle’s strategy. The company no longer wants to be just an “application layer” dependent on Ethereum or Solana but aims to build its own “underlying public chain” to control core pricing and governance rights.

Arc’s architecture is thoughtfully designed for financial scenarios. Built on Cosmos SDK but fully compatible with Ethereum Virtual Machine (EVM), existing Ethereum developers can migrate at zero cost. Technologically, Arc uses a high-performance consensus engine called Malachite, an improved Byzantine Fault Tolerance (BFT) algorithm, which compresses transaction finality to sub-second levels (about 780 milliseconds). For high-frequency payments and FX settlement, this “instant finality” is crucial, eliminating the rollback risks common on traditional public chains, making blockchain transfers as seamless as Visa or Alipay.

Economically, Arc introduces the most disruptive innovation: directly using USDC as the network’s native Gas fee token. This design hits the pain point of enterprise users. On traditional public chains, enterprises must hold volatile assets like ETH or SOL to pay fees, complicating accounting and tax compliance. In Arc, all costs are denominated in USD (USDC), eliminating exchange rate risk. Additionally, with the “Paymaster” mechanism, application developers can even pay Gas fees on behalf of users, enabling a completely “perceptionless” user experience. This “frictionless” experience is a prerequisite for blockchain’s large-scale commercial adoption.

Notably, Circle has explicitly disclosed plans to issue an Arc native token. This token will mainly be used for network governance and validator staking, not for paying fees. This dual-token model (USDC for fees, native token for governance) ensures usability while retaining the potential to capture network value through tokens. For investors, this implies future opportunities for additional gains via airdrops or token appreciation.

05 Deep Financial Analysis: Structural Concerns Behind Growth

Examining Circle’s financial statements reveals a typical “high growth, high dependency, high cost” profile. According to Q3 2025 financials, the company achieved total revenue of $740 million and net profit of $214 million, but behind these seemingly prosperous figures lie structural issues that must be addressed.

First, revenue sources are highly concentrated. Up to 96% of revenue comes from reserve interest income, meaning Circle is essentially a “shadow bank” earning from interest margin. Its business model involves accepting fiat deposits at zero cost (converted to USDC), then investing in short-term US Treasuries for yield. This model is extremely sensitive to macro interest rate environments. Data from 2025 shows that despite significant revenue growth, it was entirely driven by expanding USDC circulation (volume increase) to offset declining reserve yields (price drop). If the Fed enters a deep rate-cut cycle in 2026, and USDC’s growth cannot outpace the rate decline, the company faces a “Davis double whammy” of revenue collapse.

Second, distribution costs are becoming a profit black hole. In Q3 2025, Circle paid partners $448 million in distribution costs, a 74% YoY increase, even faster than revenue growth. The core reason is the revenue-sharing agreement with Coinbase, which grants Coinbase 100% of USDC reserve interest income on its platform and 50% of off-platform USDC interest income. While this benefited USDC’s rapid liquidity acquisition early on, it now severely limits Circle’s gross margin expansion. Data shows that after deducting distribution costs, the real revenue (RLDC) profit margin is only about 39%, far below the 70-80% gross margins typical of pure software companies.

Additionally, the quality of net profit is questionable. Of the $214 million net profit in Q3, $61 million came from tax benefits and $48 million from fair value gains on convertible bonds. Excluding these non-recurring items, core operating profit remains solid but lacks explosive growth. This indicates Circle is still in a “spending for scale” phase, not yet benefiting fully from network effects and decreasing marginal costs.

06 Valuation Logic and Institutional Battles: Deep Clash of Views

Wall Street’s valuation logic for Circle is fundamentally divided, reflecting differing predictions about the “endgame” of stablecoins.

The bullish camp, led by Bernstein, strongly believes in Circle’s network effects. Analyst Gautam Chhugani argues that the market wrongly views Circle as a bank constrained by interest rate cycles, ignoring its role as a “next-generation payment network” technology. Bernstein’s core thesis is that as blockchain payments penetrate cross-border trade and B2B settlements, USDC will evolve from a simple “transaction medium” into a highly sticky “settlement currency.” They forecast that even in low-interest environments, USDC’s annual compound growth rate (CAGR) will exceed 20%, enough to offset declining interest income. Based on this, they assign a valuation of 21-29x EV/EBITDA, comparable to Visa and Mastercard, with a target price of up to $230.

The bearish and neutral camp, represented by Goldman Sachs and Mizuho, tend to evaluate Circle through traditional financial frameworks. Goldman Sachs analyst James Yaro points out that Circle lacks diversified lending businesses like banks, with assets heavily concentrated in government bonds, making its income less resilient in a rate-cutting cycle. More critically, they are pessimistic about the upcoming 2026 Coinbase agreement renewal, fearing Coinbase’s channel monopoly could lead to higher revenue sharing, further squeezing Circle’s margins. Mizuho is more aggressive, setting a target price of $70, citing Tether’s first-mover advantage and the entry of giants like PayPal as factors that could trigger a price war in stablecoins. They also warn of potential insider selling pressure after the IPO lock-up expires.

Other institutions like HC Wainwright and Wolfe Research give more moderate ratings, believing Circle’s current stock price reasonably reflects its growth expectations, with no significant catalysts in the short term. This polarized rating distribution reflects that Circle is at a critical juncture of business model validation: whether it evolves into a high-margin tech platform or regresses into a low-margin funds channel.

07 Global Regulation and Competition Landscape: Geopolitical Compliance Battles

2025 is the year of reshaping global stablecoin regulation, with geopolitical and compliance barriers becoming key variables influencing market share.

Europe is Circle’s biggest victory. With the enforcement of MiCA regulation, unlicensed Tether (USDT) was forced off major exchanges, and Circle, holding an EMI license issued by France, became nearly the sole compliant USD and EUR stablecoin provider in Europe. This “regulatory dividend” enabled Circle to achieve textbook-like market conquest, exemplified by the surge in EURC circulation. This not only brought direct business growth but also established Circle’s global brand image as a “regulation-friendly” stablecoin.

In the US, the competitive landscape is more complex. Although the GENUIS Act provides a legal framework, payment giants like PayPal’s PYUSD are leveraging their hundreds of millions of active users and extensive merchant networks to challenge USDC in retail payments. PayPal’s strategy is “off-chain payments, on-chain settlement,” which is more user-friendly and does not require users to understand blockchain complexities. Additionally, bank-based “tokenized deposits” promoted by JPMorgan Chase and others, which enjoy deposit insurance and have credit risk directly tied to the bank, are highly attractive to enterprise clients prioritizing safety. Circle must demonstrate that USDC’s interoperability surpasses that of closed bank ledgers to win in this B2B payments war.

In emerging markets, despite Circle’s efforts, Tether still dominates due to its strong penetration in gray areas and first-mover advantage. Especially in high-inflation countries like Argentina and Turkey, USDT has become de facto fiat currency. To break Tether’s fortress, Circle needs more than compliance; it must improve payment experience and local exchange channels.

08 Core Business Risks Assessment

When valuing Circle, we must be aware of multiple risks.

Business Agreement Risk: The most immediate and certain risk stems from the 2026 renewal of the Coinbase agreement. This is not just a simple negotiation but a matter of Circle’s profit and loss. If Coinbase demands a higher revenue share or changes the exclusive 100% interest on platform funds, Circle’s profitability will be severely impacted. Given Coinbase’s own growth pressures, concessions are unlikely, making this a “black swan” event investors must watch closely in 2026.

Macroeconomic and Interest Rate Risks: Circle’s business model is fundamentally a product of inflation hedging. In high-interest environments, it earned huge interest income. But as major economies enter a rate-cutting cycle, this prosperity ends. If the Fed cuts rates to 2% or lower, Circle will need to expand USDC circulation by 2-3 times to maintain current income levels. This demands extremely high market expansion capabilities. If growth falls short, revenue could plummet sharply.

Technical Security and Competition Risks: Although Circle claims technological leadership, Arc and CCTP, as complex codebases, still face potential security vulnerabilities. History shows cross-chain bridges have been hacked, causing hundreds of millions in losses. A similar incident involving CCTP would be devastating to USDC’s reputation. Moreover, blockchain infrastructure competition is fierce, with Ethereum Layer 2s (like Base, Arbitrum) and Solana establishing strong developer ecosystems. As a new entrant, Arc’s ability to attract quality applications during its “cold start” phase remains uncertain.

09 Industry Endgame and Strategic Summary

At the dawn of 2026, understanding Circle should not be limited to viewing it as a stock ticker but as a microcosm of global financial infrastructure transformation.

Circle’s story is essentially the evolution of currency from “digitalization” to “programmability.”

From an industry endgame perspective, the concept of “stablecoin” may eventually disappear or become invisible, becoming the underlying standard for all financial transactions. The future payment wars will no longer be about who issues tokens but about who controls standards and networks.

Circle’s launch of the Arc network and open CCTP protocol is precisely aimed at competing for the right to set this “standard protocol for on-chain value flow.” If successful, Circle will evolve from a profit-seeking financial company into an indispensable global financial utility infrastructure akin to SWIFT or Visa.

However, the road to this vision is fraught with challenges. Circle is caught in a delicate strategic squeeze: upward, it faces “downgrade attacks” from traditional banking giants like JPMorgan Chase (tokenized deposits); downward, it faces fierce resistance from native crypto players like Tether; and in the middle, it must navigate the interests of allies like Coinbase.

For industry observers and participants, the key focus in the next two years will be:

First, “de-cryptification” of payments. Can Circle enable ordinary users to pay with USDC via Arc’s Paymaster and other technologies, without perceiving blockchain, Gas fees, or mnemonic phrases? This is critical for stablecoins to break out of the “crypto circle” into the “business circle.”

Second, real-world B2B settlement deployment. Will large-scale cross-border trade and supply chain finance start using USDC to replace SWIFT? This is the real business scenario supporting high valuation, not just speculation.

Third, ecosystem independence. Can the Arc network free itself from Coinbase dependency and establish an independent developer and merchant ecosystem? This is key for Circle to control its own destiny.

In summary, Circle embodies the forefront of fintech exploration. Its “Economic Operating System,” once built, will greatly reduce friction costs in global value flows. But realizing this grand blueprint depends heavily on whether it can find the perfect balance among compliance, technology, and business ecology within the next 24 months.

Disclaimer This report is compiled based on publicly available information, market data, and third-party research as of January 3, 2026. The content is for industry research and academic exchange only and does not constitute any securities trading advice or investment decision basis. Financial markets are volatile, and the digital asset industry carries high risks. Readers should seek independent advice from professional financial advisors before making any investment decisions.