When stablecoins take the spotlight, the "first stablecoin stock" is set to IPO on Thursday

This Thursday, the cryptocurrency market will witness the most important IPO event of the year.

Circle Internet Group—issuer of the $60 billion USDC stablecoin—will be listed on the New York Stock Exchange. The company will issue 32 million Class A shares, with an offering price range of $27 to $28, expecting to raise up to $896 million, with the stock code CRCL. The company will finalize the pricing on Wednesday evening and begin trading the next day.

This IPO has received enthusiastic support from Wall Street. Circle's target valuation has been raised from the previous $5.65 billion to $7.2 billion. BlackRock is leading with a 10% stake, and Ark Investment has also expressed interest in investing up to $150 million. However, beneath the glamorous surface of Wall Street giants rushing to enter, Circle also faces structural challenges.

The seemingly "perfect" money-printing machine model

Stablecoins have quietly become the backbone of the cryptocurrency market, and their relationship with traditional finance is becoming increasingly close. In 2024, the trading volume of stablecoins reached $27.6 trillion, nearly 8% higher than the combined trading volume of Visa and Mastercard.

Currently, the total market capitalization of stablecoins has reached $248 billion, with Circle's USDC holding a 25% market share, second only to Tether's USDT at 61%, with a total market capitalization of $60 billion. Circle's EURC ranks first among euro-backed stablecoins, with a market capitalization of $224 million.

Circle's advantage lies in its regulatory compliance.

In the United States, USDC positions itself as a compliant bridge between the cryptocurrency ecosystem and traditional finance. In the European Union, the implementation of MiCA—and the resulting delisting of non-compliant stablecoins like USDT from major regulated exchanges—has paved the way for USDC to become the leading stablecoin in the region.

Circle's business model is simple and enticing: the company issues USDC stablecoins pegged 1:1 to the dollar, investing the $60 billion deposited by users in short-term U.S. Treasury bonds to earn risk-free returns.

The company primarily invests in U.S. Treasury bonds (85% managed by BlackRock's Circle Reserve Fund) and cash (10-20% held in globally systemically important banks). This model is highly profitable, generating approximately $1.6 billion in interest income ("reserve income") in 2024, accounting for 99% of Circle's total revenue.

Coinbase "sucking blood"

But behind the seemingly "perfect" money-printing machine model, Circle's financial data presents a dual face of growth and pressure: In 2024, Circle's total revenue and reserve income reached $1.676 billion, a year-on-year increase of 16%, steadily rising from $1.450 billion in 2023 However, net profit fell from $268 million to $156 million, a decline of 42%.

Behind the contradictory financial data, the surge in "distribution, transaction, and other costs" is primarily influenced by the profit-sharing agreement between Circle and Coinbase.

The cooperation between Coinbase and Circle began in 2018: the two parties established the Centre Consortium in 2018, thereby creating USDC. In 2023, after the dissolution of the alliance, Coinbase acquired equity in Circle, while Circle gained full control of the USDC ecosystem.

However, this split did not end the distribution of cash flow between the two parties; both companies still share the interest income from the reserves supporting USDC. According to Circle's S-1 filing, there is the following revenue-sharing agreement between Circle and Coinbase:

USDC on the Coinbase platform: Coinbase receives 100% of the reserve income.

USDC on non-Coinbase platforms: Coinbase and Circle each receive 50% of the reserve income.

As of the first quarter of 2025, USDC on the Coinbase platform accounted for approximately 23% of the total circulation. This proportion highlights Coinbase's significant position in the USDC ecosystem and reflects its role as the primary custody platform.

According to data disclosed by Coinbase, in 2024, Coinbase earned $908 million from USDC-related businesses, accounting for about 14.5% of its net income.

Coinbase also has decision-making power over Circle's business partners. If Circle wants to sign new revenue-sharing or distribution agreements with third parties, it needs to obtain approval from Coinbase.

Some analysts believe that the "close" cooperation terms between the two may lay the groundwork for Coinbase to acquire Circle in the future.

Hidden "Fatal" Flaws

In addition to the high "distribution" costs, Circle's seemingly "money-printing" business model has serious flaws.

First, Circle's revenue is highly dependent on interest rate performance. With a return rate of 4.75%, $60 billion of USDC could yield about $2.85 billion, which is roughly the income Circle can earn without taking any risks.

However, problems arise when interest rates decline. The cost of maintaining these earnings (in terms of risk) will be higher. Taking on excessive risk can be very tempting. There is also pressure from competitors who may be willing to sacrifice a large portion of reserve income for market share.

At the same time, Circle's performance is closely related to the volatile broader cryptocurrency market.

Due to the collapse of Terra and the FTX platform, Circle lost $768.8 million in 2022; in 2023, following the bankruptcy of Circle's partner Silicon Valley Bank, the selling pressure on USDC increased, directly leading to a halving of USDC's market value (at the time of signing the agreement with Coinbase).

External Competitive Pressure Intensifies

Ordinary stablecoins backed by the US dollar have no entry barriers. Providers need to be more creative than their competitors to make their stablecoins the industry standard.

ARK believes that by 2030, the scale of stablecoins will grow from the current approximately $250 billion to $1.4 trillion. This may depend on how much "floating income" stablecoin issuers agree to share in the form of "incentives" to win or capture market share.

As the regulatory environment becomes clearer, Circle may face more intense competition. Tech giants like Amazon and Google may launch their own stablecoins, while banks such as Bank of America, Citigroup, and JP Morgan are also exploring joint issuance of stablecoins.

PayPal has already launched its own stablecoin and plans to return most of the reserve income to users. This trend of "competing on benefits" may compress profit margins across the industry.

The Timing for an IPO Could Not Be Better

Despite facing various internal and external issues, Circle's timing for an IPO is "just right."

Supporters believe that stablecoins are becoming the de facto digital dollar—especially in an environment where the U.S. is increasingly hostile towards central bank digital currencies (CBDCs). The potential market for stablecoins encompasses global remittances, institutional payments, and DeFi integration. The infrastructure and regulatory positioning that Circle has built may give it a competitive edge.

As Benjamin Billarant, founder of Balthazar Capital (an asset management company with significant investments in cryptocurrency-related stocks), commented,

The timing for Circle's IPO could not be better. We have reached a critical turning point for the mainstream adoption of stablecoins.

Once the GENIUS Act is passed, it will provide the regulatory transparency needed to unleash its full potential—while Circle, with its compliance-first philosophy, has a unique advantage to capitalize on this opportunity In fact, the most comprehensive stablecoin bill in the United States to date—the bipartisan GENIUS Act—was passed by the Senate on May 21 and is currently under review by the House of Representatives. This is undoubtedly an excellent opportunity for Circle's IPO.

The $7.2 billion high valuation also tells a similar "story" (Circle's PE valuation has surpassed that of credit card giant Visa): USDC is just the beginning of tokenization.

While Circle currently relies on demand from the cryptocurrency market, in the future, stablecoins will sweep the globe as a smoother and more efficient payment method than what is currently offered.

In addition to ordering pizza at home or purchasing goods from abroad, there is also the potential to build new applications and financial products along the same lines. As the Trump administration pushes stablecoins into the mainstream, all of this will expand the demand for USDC and generate more fee income.

Is the $7.2 billion valuation reasonable? The market will ultimately provide the answer. But one thing is certain: whether Circle can timely transform from "easy" interest-driven revenue to more challenging product-driven income will determine its long-term fate.

Major Shareholders Sell, Wall Street Buys

Interestingly, existing shareholders of Circle are cashing out on a large scale during this IPO.

According to the prospectus, shares sold by existing shareholders account for 60% of the total issuance, far exceeding the typical tech IPO.

According to the company's prospectus, Circle CEO Jeremy Allaire will sell 8% of his shares, and several well-known venture capital firms also plan to reduce their holdings by about 10%. Although internal shareholders still retain a significant amount of shares, the large-scale cash-out may send complex signals to the market.

In tech company IPOs, it is extremely rare for the issuance from existing shareholders to exceed the company's issuance.

Meta is one of the few exceptions. The social network raised a record $16 billion in its massive IPO in 2012, with 57% of the shares sold by existing shareholders