Circle (USDC, CRCL): how the USDC issuer makes money, what backs it, Arc and the risks

Circle Internet Group issues USDC, the second-largest dollar stablecoin, and its euro sibling EURC, and its shares have traded on the New York Stock Exchange as CRCL since June 2025. Almost all of Circle’s USDC revenue comes from one place: interest on the reserves behind the token. In the first half of 2026 that reserve income was 94.6% of revenue, according to the company’s quarterly filing with the SEC.

So Circle lives on US interest rates and on partners such as Coinbase that put USDC in front of users, and it hands those partners most of what it earns. In 2026 it has tried to build a business around the coin as well: a blockchain called Arc, a payments network for banks and a federal trust bank, opened in July.

Who is behind USDC: Circle Internet Group in brief

Circle was founded in August 2013, according to its IPO prospectus, and co-founder Jeremy Allaire has been chairman and chief executive ever since. USDC launched in September 2018 through the Centre Consortium, a joint venture with Coinbase. EURC followed in June 2022. In August 2023 Circle bought the other 50% of Centre for about 8.4 million shares, valued at $209.9 million in its annual report, and has governed USDC alone since.

In its 10-Q for the quarter ended 30 June 2026, Circle calls itself a “full-stack internet financial platform” built on three pillars. One is Arc, its layer-1 blockchain, with developer tools such as the Cross-Chain Transfer Protocol (CCTP) and Gateway. Another is its digital assets: USDC, EURC, the tokenised money-market fund USYC, cirBTC, the Circle Mint service and xReserve. The last is applications, chiefly the Circle Payments Network (CPN) and StableFX, an institutional currency-exchange engine on Arc. USYC came with Hashnote, bought in January 2025 for about $100.1 million.

The token and the company are different things. USDC is meant to be worth one dollar at all times, and Coindaro’s USDC coin page tracks it with live data. CRCL is a share in the issuer. Owning one gives no claim on the other, and this page takes no view on either as an investment.

How Circle USDC works: minting, redemption and Circle Mint

An issuer takes in dollars and hands out tokens one for one; when tokens come back, it burns them and pays the dollars out. Our beginner’s guide to stablecoins explains the general idea.

Two Circle entities issue and redeem USDC: Circle Internet Financial, LLC in the United States and Circle Internet Financial Europe SAS in France. Large customers reach them through Circle Mint, which takes exchanges, institutional traders, banks and other big institutions and handles transfers in more than 185 countries. Individuals cannot use it. “Mint is not available to individuals or small businesses,” says Circle’s USDC page. A private holder buys and sells USDC on an exchange, a neobank or a wallet app, at that venue’s price and fees.

For those who can use Mint, Chief Commercial Officer Kash Razzaghi wrote on 16 October 2026 that redemption over standard banking rails is free and typically settles within up to two business days, and that customers on CPN or the Circle Platform can redeem at no cost in near real time, around the clock. He put first-quarter redemptions at $71.8 billion, about 90% of the supply then in circulation. Those are Circle’s figures.

Circle says USDC is natively issued on 38 blockchains, and its developer docs list 38 mainnet contracts, from Ethereum, Solana and Base to Stellar, Sui and HyperEVM. DefiLlama counts 157 chains because it also counts bridged copies that Circle does not issue. On Ethereum the contract is 0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48.

The contract carries a power the chain count hides. Circle can blacklist an address, which then cannot send or receive USDC, and it can pause the token altogether. The README of Circle’s open-source stablecoin-evm repository puts it plainly: “The entire contract can be frozen, in case a serious bug is found or there is a serious key compromise.” USDC is a regulated, centralised dollar. It is not censorship-resistant.

USDC reserves: what backs each token and who checks it

At 31 August 2026 the USDC reserve held $73.40 billion against $73.32 billion of USDC in circulation, according to the monthly report on Circle’s transparency page. About 84.9% sat in the Circle Reserve Fund, a government money-market fund registered under the SEC’s Rule 2a-7, managed by BlackRock, held in custody at BNY and open only to Circle. On that date the fund held $49.58 billion of overnight Treasury repurchase agreements, $11.92 billion of Treasury bills maturing by mid-November, and about $1 billion of cash. BlackRock publishes its holdings daily, the 10-K says.

The other $11.08 billion was mostly cash at regulated banks ($9.59 billion) plus $1.30 billion of Treasury bills held outside the fund. The fund’s share moves with that cash: 88% at the end of 2025, about 84% at 30 June 2026, 84.9% at the end of August.

Circle describes the examiner only as a Big Four accounting firm, and the name is not in the text of the report, so we do not print it. The work is an examination under AICPA attestation standards, not an audit of Circle’s accounts. Its opinion is that management’s statement, that reserves are worth at least as much as the USDC in circulation, is fairly stated in all material respects on two dates (11 and 31 August). Deloitte & Touche audits Circle’s financial statements, which is a separate job. On 19 October the newest report on the transparency page was still August’s.

The bank cash is where USDC has been hurt before. In March 2023 Silicon Valley Bank failed while holding $3.3 billion of USDC reserves, about 8% of the total, and did not honour Circle’s withdrawal request. USDC fell below $1 on secondary markets and recovered soon after the FDIC said on 13 March that it would guarantee all SVB deposits. DefiLlama shows supply falling from $43.2 billion on 10 March 2023 to $39.1 billion four days later, and to $23.9 billion by 1 January 2024. The prospectus says average daily circulation fell 39% after the episode.

How Circle makes money from USDC, and why 59 cents of each dollar leaves

Circle invests the reserve in short-term government paper and keeps the yield, since USDC pays its holders nothing. In the second quarter of 2026 the reserve return rate was 3.5%, down from 4.1% a year earlier, according to the 10-Q for the quarter ended 30 June 2026. The 66 basis-point fall in yields cost about $113.9 million of reserve income in the quarter. A bigger float made up for it: USDC averaged $76.5 billion over the quarter, and stood at $73.3 billion on 30 June against $61.3 billion a year before.

Item (10-Q)	Q2 2026	Q2 2025	H1 2026
Reserve income	$667.7M	$634.3M	$1,320.2M
Total revenue and reserve income	$701.3M	$658.1M	$1,395.4M
Distribution and transaction costs	$410.4M	$406.5M	$815.8M
of which paid under the Coinbase agreements	$324.6M	$332.3M	$655.3M
Net income attributable to common shareholders	$48.2M	-$482.1M	$103.5M

Most of that money leaves again. Distribution and transaction costs took $815.8 million in the half, about 58% of revenue. Circle’s own version, in Razzaghi’s 16 October post, is that roughly 59 cents of each revenue dollar went to partners and transaction costs, about 34 cents paid for licences, banking, liquidity, compliance and chain integrations, and about 7 cents was left as net profit.

The 2025 loss in the table is mostly an IPO effect: the 10-Q ties it to $423.8 million of stock-based compensation recognised when the shares started trading. Revenue less distribution costs, a measure Circle reports, was $289 million in the second quarter of 2026, a 41% margin against 38% a year earlier. Adjusted EBITDA rose to $143 million from $126 million.

Rates are the lever that matters. The 10-Q models a one-point cut from June’s 3.49% average yield, held for twelve months with circulation unchanged: reserve income falls by about $737 million and distribution costs by about $360 million, so Circle’s own share shrinks by roughly $377 million by our arithmetic. Partners absorb part of a rate cut; Circle absorbs slightly more.

Other revenue, from subscriptions, services and transactions, was about 5% of the half’s total. On 5 August Circle raised its full-year forecast for that line to $310 million to $330 million, from $150 million to $170 million, with a footnote saying the new range includes recognised ARC token presale revenue. Part of the increase is therefore a token sale, not recurring fees. DefiLlama gives a sense of proportion: $2.38 billion of gross reserve yield for “Circle USDC” over the year to 19 October 2026, against $1.62 million of CCTP fees.

Coinbase, Binance and the fight for distributors

Coinbase is the largest single cost. Payments under the Coinbase agreements came to $655.3 million in the first half of 2026, about 80% of the distribution and transaction line by our arithmetic. Our Coinbase review covers the exchange from a user’s side.

The 10-K, filed on 9 March 2026, sets out the formula. Each day the two companies start from net reserve income after third-party fund fees. Circle keeps an issuer portion. Each side then gets an allocation in proportion to the USDC held on its own platform. On USDC held elsewhere in the market, Coinbase receives half of what remains once approved third parties under the Stablecoin Ecosystem Agreement have been paid. Coinbase also holds a minority stake in Circle and a perpetual licence to use the USDC and EURC trademarks, subject to termination rights.

The deal dates from August 2023, ran for an initial three years and renews automatically for three-year terms unless either side fails its ongoing obligations, the 10-K says. The 10-Q filed on 5 August 2026 says nothing about the renewal.

Circle has been growing the slice it holds itself. “USDC on platform”, meaning balances in Circle Mint, corporate accounts and non-custodial wallets, reached $12.44 billion at 30 June 2026, about twice the year before, and averaged 19.5% of circulation in the second quarter against 7.4% a year earlier. The larger that share, the more income Circle keeps under the formula.

Binance is the other big partner. A November 2024 deal, which cost Circle a $60.3 million upfront fee, and an August 2025 extension were replaced on 17 September 2026 by a five-year arrangement: Circle pays Binance a monthly fee based on USDC held through Circle’s Modular Smart Contract Wallet service. Binance also bought 1,237,011 new Circle shares for $100 million, at a discount to the market price, and agreed not to sell them for up to two years, according to an 8-K filed on 22 September.

Rivals court the same partners. Open USD, announced on 30 June 2026 with more than 140 companies on its list, passes most reserve income to participants after a small management fee, according to The Block. Paxos’s Global Dollar Network offers partners up to 100% of the reserve rewards on the USDG they hold. Circle’s 59-cent figure, published in October, is its reply.

USDC supply and market share against USDT

DefiLlama counted about $72.5 billion of USDC on 19 October 2026, against $74.4 billion a month earlier. The record in its data is $79.6 billion, reached on 18 March 2026, so supply is about 9% below the peak. Circle’s own page showed $72.5 billion on 15 October.

That is just under a quarter (about 23.7%) of the $306 billion of dollar stablecoins DefiLlama tracks. USDT has $183.4 billion, about 60%. The next issuers are much smaller: USD1 at $4.0 billion, USDG at $3.0 billion and PYUSD at $2.8 billion.

Ethereum carries most of the USDC, $44.8 billion. DefiLlama then lists Hyperliquid at $7.0 billion, Solana at $6.8 billion, Base at $4.3 billion and Arbitrum at $2.3 billion. EURC is far smaller: €447.1 million on Circle’s page on 15 October, €496 million on DefiLlama on 19 October, with different dates and methods.

Circle’s long-term target, repeated on 5 August, is 40% compound annual growth in USDC circulation over several years. Since March the curve has gone the other way, which makes circulation the first figure to read in the third-quarter results.

Circle Arc blockchain, CCTP and the Payments Network

Arc is Circle’s attempt to own the rails as well as the coin: a layer-1 blockchain where gas is paid in USDC. A public testnet opened in October 2025 and a private mainnet in May 2026. By 30 June the testnet had processed 502 million transactions from 2.8 million wallets, according to the 10-Q. “Arc is launching on public mainnet September 16th,” Jeremy Allaire said in the 5 August results release.

It did. The Block reported more than 100 applications at launch on 16 September, among them an Aave V4 market, Morpho and Uniswap. The chain runs under proof of authority with a permissioned validator set. Alongside Circle, the 11 founding validators named in August are BlackRock, DTCC, Galaxy, Global Payments, ICE, Mastercard, MoneyGram, SBI Group, Standard Chartered, Sumitomo Corporation and Visa, which join in phases. A move to proof of stake is something Circle is exploring for 2027.

Ten billion ARC tokens were minted at genesis. Circle said the mint “is not a commitment to publicly launch ARC”, as quoted by Decrypt, and no allocation table has been published. In the second quarter Circle agreed to sell 807.5 million ARC at $0.30 each to institutional buyers, about $242.2 million in all, a price that implies a $3.0 billion fully diluted value. Those tokens are locked for at least a year after a proof-of-stake transition, and buyers can claim repayment in certain cases, including if that transition has not happened by 8 May 2028.

CCTP is the older piece. It moves USDC between chains by burning it on one and minting it on the other, with no liquidity pool in between. Version 2 adds a Fast Transfer mode that settles in about 8 to 20 seconds, against 15 to 19 minutes for a standard transfer from Ethereum or a layer 2, according to Circle’s developer docs.

CPN links banks and payment firms so they can settle in stablecoins at any hour; the 10-Q calls it “near-instant, 24/7/365 payment settlement using regulated stablecoins”. At the end of June it carried $14.7 billion of annualised volume, measured over the trailing 30 days, up 76% on the quarter, with 175 financial institutions enrolled.

Circle is also buying reach. On 4 September 2026 it signed to acquire Tazapay, a Singapore payments firm, for $400 million in Circle shares, adjusted for debt, expenses and cash. The 8-K makes closing subject to regulatory approvals; DealStreetAsia reported that these include the Monetary Authority of Singapore and that closing is expected in 2027.

Licences: OCC trust bank, MiCA and the EBA from 12 November

Circle lists licences in the US, the EU, the UK, Singapore, the UAE, Bermuda, Canada and Japan. Its claim to be “the most licensed stablecoin company in the world” rests on its own comparison of the ten largest stablecoin companies.

In the US, the Office of the Comptroller of the Currency gave final approval on 9 July 2026 for First National Digital Currency Bank, N.A., which operates as Circle National Trust. It opened on 24 July and offers custody first. Circle says the charter “enables future capabilities, including management of the USDC Reserve”: a later step, not a current one. New York’s financial regulator also approved a Circle New York Trust. The GENIUS Act, signed on 18 July 2025, takes effect on 18 January 2027, as our GENIUS Act effective-date page explains.

In Europe, Circle announced on 1 July 2024 that its French entity had an electronic money institution licence from the ACPR, and called itself the first global stablecoin issuer to comply with MiCA, the rules covered in our MiCA guide. On 14 October 2026 the European Banking Authority classified USDC as the first significant e-money token among the 45 notified in the EU. From 12 November the EBA supervises USDC’s reserve, own funds, liquidity and recovery and redemption plans; the ACPR keeps governance, fit-and-proper checks and conflicts of interest.

Funding: from venture rounds to the 2025 IPO

Before going public, Circle raised money from venture funds and strategic investors for almost a decade. Reported rounds include $50 million in April 2015, co-led by IDG Capital and Goldman Sachs; $60 million in June 2016 with Baidu among the backers; $110 million in May 2018 led by Bitmain; $440 million in June 2021 from investors including FTX, Fidelity and Marshall Wace; and $400 million announced in April 2022 by BlackRock, Fidelity, Marshall Wace and Fin Capital. Published totals differ too widely to print one.

The IPO was priced at $31.00 on 4 June 2025 and trading began the next day. The prospectus offered 34 million Class A shares, 14.8 million from Circle and 19.2 million from existing holders. The underwriters then took up their option in full, so Circle sold 19.9 million shares and received $583.0 million after underwriting discounts, according to the 10-Q. Class B shares carry five votes each, capped at 30% of voting power, and Class C shares have none. The Binance placement and the Tazapay deal add new shares, a question for shareholders rather than for USDC holders.

Smart contract audits: CCTP reviewed, the USDC contract without a public report

ChainSecurity has published two reviews of CCTP on its own site. The first, on the original contracts, is dated 6 December 2022 on its cover; ChainSecurity’s project page lists the work as completed on 26 April 2023. The second, on version 2, is dated 8 April 2025. Both conclude that the code “provides a high level of security”, and both note that the bridge depends on trusted accounts, including the attestation service that Circle operates.

We found no public audit report for the USDC token contract itself. The stablecoin-evm repository has no audits folder, and Circle’s documentation lists none. The code has been open source under the Apache 2.0 licence and in use since 2018, which is not the same as a published third-party review. We found no audit report for Arc either, a month after its launch.

Is USDC safe? The risks a holder should weigh

For someone holding USDC, two questions matter: are the reserves there and reachable, and can Circle freeze my address? The monthly examinations and BlackRock’s daily fund data answer the first about as well as any stablecoin does, while SVB in 2023 showed that bank cash is the weak point. The answer to the second is yes: Circle can blacklist an address, and an individual can only turn USDC into dollars through a third party.

The company’s risks are different. Reserve income depends on short-term US rates, and the 10-Q’s own model puts a one-point cut at about $737 million of lost reserve income a year. Most distribution costs go to a single partner, while Open USD and USDG offer partners richer terms. One BlackRock fund holds about 85% of the reserve. Circulation has fallen since March while the stated target is 40% growth a year.

The management team is changing. On 25 September 2026 Circle said CFO Jeremy Fox-Geen would step down, staying in the post until the end of December or until a successor is named; none had been announced by 19 October. The same day co-founder Sean Neville left the board “for personal reasons”, cutting it to seven directors. Arc is new, run by a permissioned validator set and without a published audit, and its token has not launched. The 10-Q also discloses a dispute with a financial advisor that claims fees on past transactions, which Circle contests. None of this is investment advice.

Circle news this month: EBA supervision, partners, new markets and Visa

Four Coindaro pieces cover October: the EBA taking over supervision of USDC’s reserve from 12 November, Circle’s case that partners already receive 59 cents of every USDC dollar, Jeremy Allaire’s plan to take USDC to about 40 more emerging markets, and Visa Direct’s USDC prefunding going live with Inyo Global.

Next Circle dates: Q3 results on 4 November

Circle reports its third-quarter 2026 results on Wednesday 4 November, with a webcast at 8 a.m. ET; they will be the first to include the Arc mainnet and the new Binance terms. The EBA takes over reserve supervision on 12 November. Fox-Geen’s last day as CFO is 31 December at the latest, and the GENIUS Act applies from 18 January 2027. Further out come the Tazapay closing, a possible Arc switch to proof of stake, and 8 May 2028, when ARC presale buyers gain repayment rights if that switch has not happened.