Is it still worth buying Circle on the callback?

Author: Leo Z

1. What is Circle

Circle is the issuer of USDC. USDC is the second largest stablecoin in the world, with a circulation of about $77 billion, and each USDC is backed by an equivalent amount of dollar assets (mainly short-term U.S. Treasury bonds) as reserves.

Circle's revenue source is simple: it invests these reserves in U.S. Treasury bonds to earn interest rate spreads. Total revenue for FY2025 is projected to be $2.75 billion, with 95% coming from reserve interest. It plans to go public in June 2025, with a current market value of about $15-20 billion.

The market pricing for Circle is essentially equal to "USDC circulation × interest rate × conservative multiple." This means: if you believe Circle is just a company that earns interest, the current pricing is roughly reasonable. If you think it is evolving into a fee-based digital dollar infrastructure network, then the current price does not reflect that value.

This article aims to answer: Is the transformation happening? How much evidence is there? What is it worth?

2. Core Question: Is USDC being "held" or "used"?

Before discussing valuation, let's answer a question that is more important than any financial model.

For the same $77 billion USDC, if it is just being held by institutions to earn interest, then Circle is a rate-sensitive financial company, valued at 10-15x. If it is being frequently used for payments, settlements, cross-border transfers, and developer calls, then Circle is growing into a fee-based infrastructure network, valued at 25-30x.

Two key data points can help you judge:

First, the on-chain transaction volume of USDC is growing much faster than its circulation. In FY2025, USDC circulation grew by 72%, but on-chain transaction volume grew by 247%. This means that each dollar of USDC is being used more frequently. This is not "increased stock," but "increased flow."

Second, USDC has surpassed USDT to become the largest settlement asset. Visa Onchain Analytics removes about 85% of on-chain noise (bots, internal exchange transfers, high-frequency arbitrage). After adjustment, USDC accounts for 64% of the real economic settlement volume (Mizuho, February 2026), while USDT only accounts for about 28%—despite USDT's circulation being 2.4 times that of USDC.

This gap itself is the strongest signal: USDC is transitioning from "an asset people hold" to "a network people use." But this transformation is not yet complete—later we will discuss what conditions are needed to confirm it.

3. Three-Tier Revenue Structure

Circle's revenue is divided into three tiers. The market is currently pricing almost exclusively for the first tier.

First Tier: USDC Interest Income—How Circle Makes Money Today

USDC is Circle's starting point and the source of 95% of its current revenue. By the end of 2025, USDC circulation is expected to reach $75.3 billion, a year-on-year growth of 72%, far exceeding Circle's own annual growth target of 40%.

The revenue logic is simple: about 80% of USDC reserves are invested in short-term U.S. Treasury bonds (managed through the USDXX fund by BlackRock), earning interest rate spreads.

Interest Income ≈ Average USDC Circulation × Reserve Yield

The reserve yield for Q4 2025 is 3.81%, down 68 basis points from the previous quarter. This exposes a core contradiction: circulation is growing rapidly, but interest rates are declining, hedging against each other. If the Fed's target rate drops to 3%, Circle needs USDC to grow to over $150 billion to maintain current revenue levels.

Structural issue: Coinbase takes most of the revenue. According to the revenue-sharing agreement signed in 2023, 100% of the USDC interest on the Coinbase platform goes to Coinbase, while Coinbase takes 50% of the interest outside the platform. In FY2025, for every dollar of interest Circle earns, about 60 cents goes to distribution partners.

The good news is that profit margins are improving. The RLDC (Revenue Less Distribution Costs) profit margin expanded from 30.0% in Q4 2024 to 40.1% in Q4 2025. The net income rate is 1.2-1.8%, after deducting Coinbase's share and operating costs.

Second Tier: Payment and Transaction Income—A Growing New Business

This is key to determining whether Circle can shed the "interest company" label.

The CPN (Circle Payments Network) launched in May 2025, providing 24/7 cross-border settlement based on USDC for banks, payment companies, and enterprises. As of February 2026, the annualized TPV reached $5.7 billion, growing about 100 times since its launch. 55 institutions have connected, 74 are under review, and over 500 are in the pipeline, covering 14 markets including Brazil, Canada, Hong Kong, India, Mexico, Nigeria, and the U.S.

However, $5.7 billion compared to the global cross-border payment market of $16 trillion is still less than 0.04%. The value of CPN does not lie in today's scale, but in whether growth can be sustained. If it can capture 1% of the cross-border market, that would mean an annualized transaction volume of $160 billion—potentially generating fees close to or exceeding interest income, and not affected by interest rates.

CCTP (Cross-Chain Transfer Protocol) enables native cross-chain transfers of USDC through "burning-minting." In Q4 2025, it processed $41.3 billion, a year-on-year growth of 3.7 times. USDC's cross-chain market share rose 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 is the most direct "transformation evidence." In FY2025, it surged from $3 million per quarter to $37 million per quarter, including subscription services of $24.7 million, transaction income of $12.2 million, and Canton Network validation node income of $7 million. Management guidance for 2026 is $150-170 million.

This part of the revenue is not affected by interest rates and does not require sharing with Coinbase. When it exceeds 10% of total revenue, the market may start to view Circle with different valuation methods. Currently, it is about 4%.

Third Tier: Settlement Platform—Long-Term Potential

Arc is Circle's planned institutional-grade settlement chain set to launch its mainnet in 2026, with USDC as the native gas token. The testnet has already processed over 166 million transactions, with a confirmation time of 0.5 seconds, and over 100 institutions participating (including Goldman Sachs and Mastercard).

Arc's roadmap is divided into four phases:

M1 Public Testnet (completed) → M2 Real Funds on Chain (2026) → M3 Margin/Collateral/Settlement Scenarios Implementation (2027-28) → M4 Writing Institutional Standard Operating Procedures (2029-30)

Before M2, Arc's value is zero. But if it ultimately becomes the institutional-grade settlement standard, Circle's value will no longer be that of a "fee company," but rather a "platform company." This is a necessary condition for returns of over 10x.

4. Judging Whether Transformation is Happening: Seven Dimensions

Looking at any single metric can lead to misjudgment. The key is to see if multiple dimensions are improving simultaneously—when scale, activity, profit margins, new revenue, and user growth all point in the same direction, transformation is occurring.

5. Three Most Important Tracking Metrics

① USDC Circulation (daily monitoring)

The base of Circle's revenue. Circulation × Reserve Yield = Interest Income. You should track "quarterly average circulation" rather than end-of-period snapshots. Currently about $77 billion.

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

② USDC's Share of Visa Adjusted Transaction Volume (weekly monitoring)

Answers the core question: Is USDC being used or held? The supply only accounts for 25%, but the adjusted transaction volume accounts for 64%—each dollar of USDC does 2-3 times more work than USDT.

Data source: visaonchainanalytics.com → filter by Stablecoin → click "Show % of Total" → read the USDC line

③ Other Revenue Non-Interest Income (quarterly monitoring)

The only metric that can directly prove Circle is making money outside of interest. Not affected by interest rates and does not require sharing with Coinbase. Currently $37 million per quarter, guidance of $150-170 million (2026). When it breaks 10% of total revenue, valuation methods will change.

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

6. Recent Catalysts

Coinbase Revenue Sharing Agreement Expiration (August 2026)

This is the largest single catalyst in 24 months. Currently, Circle shares about 60% of its revenue with partners. If renegotiated, and RLDC profit margin rises from 40% to 50-55%, it would effectively increase profits by 25-35%. However, Coinbase has no incentive to make significant concessions—USDC distribution on the Coinbase platform remains Circle's largest growth engine. The outcome is uncertain, but the probability of improvement over the current situation is higher.

OCC National Trust Bank License

Conditional approval received in December 2025. Full approval means: Circle can open a main account directly with the Federal Reserve (earning IORB rates, eliminating counterparty risk), bypassing commercial banks to handle an annual $483 billion minting/redemption flow, establishing an insurmountable trust barrier for enterprises and governments adopting USDC. No other stablecoin issuer has this.

x402 Foundation (established April 2026)

Coinbase will contribute the x402 payment protocol to the Linux Foundation. x402 activates the HTTP 402 status code as an internet-native payment layer, allowing AI agents, APIs, and applications to settle directly in HTTP interactions—defaulting to USDC.

Participants: Google,