Analysis of the rise potential behind Circle's listing

Circle chose to go public during the phase of accelerated clearance in the industry, hiding a seemingly contradictory yet imaginative story: the net profit margin continues to decline, yet it still contains enormous rise potential. On one hand, it has high transparency, strong regulatory compliance, and stable reserve income; on the other hand, its profitability appears mild, with a net profit margin of only 9.3% in 2024. This apparent "inefficiency" does not stem from a failure of the business model, but reveals a deeper growth logic: against the backdrop of gradually diminishing high-interest dividends and a complex distribution cost structure, Circle is building a highly scalable, compliance-first stablecoin infrastructure, with its profits strategically "reinvested" into market share enhancement and regulatory leverage.

Seven-Year Listing Marathon: The Evolution of Crypto Regulation

The listing journey of Circle reflects the dynamic game between crypto enterprises and regulatory frameworks. The first IPO attempt in 2018 coincided with a period of ambiguity in the SEC's classification of cryptocurrencies, and the company formed a "payment + trading" dual-driven model through the acquisition of exchanges. However, regulatory doubts and the impact of the bear market led to a sharp decline in valuation. The SPAC attempt in 2021 demonstrated the limitations of regulatory arbitrage thinking, with the SEC's inquiries about the accounting treatment of stablecoins hitting the nail on the head. This failure propelled the company to complete a key transformation and establish the strategic axis of "stablecoin as a service."

The choice of the NYSE IPO in 2025 marks the maturity of the capitalization path for crypto enterprises. The S-1 filing first detailed the reserve management mechanism: of the approximately $32 billion in assets, 85% is allocated through BlackRock's Circle Reserve Fund to overnight reverse repurchase agreements, and 15% is held at systemically important financial institutions. This transparent operation builds an equivalent regulatory framework with traditional money market funds.

USDC Reserve Management and Equity Structure

USDC reserves exhibit a "liquidity layering" characteristic: 15% of cash is held in large banks to respond to sudden redemptions, while 85% is allocated through the Circle Reserve Fund managed by BlackRock. The reserve assets primarily consist of short-term U.S. Treasury bonds and repurchase agreements, with a weighted average maturity of the asset portfolio not exceeding 60 days.

After Circle goes public, it will adopt a three-tier equity structure: Class A common stock has one vote per share, Class B is held by the founders with five votes per share but a total voting power cap of 30%, and Class C has no voting rights. The executive team and several well-known institutional investors hold a substantial number of shares, and the $5 billion valuation IPO will bring them significant returns.

Profit Model and Revenue Breakdown

Reserve income is the core source of revenue for Circle, with 99% of the total revenue of $1.68 billion in 2024 coming from reserve income. The revenue actually attributable to Circle is lower due to the revenue-sharing agreement with Coinbase. From 2022 to 2024, total revenue rose from $772 million to $1.676 billion, with a compound annual growth rate of 47.5%. However, the surge in distribution expenses has compressed the gross profit margin, with the gross margin declining from 62.8% to 39.7%.

In 2024, the net profit was $155 million, with a net profit margin falling to 9.28%. The rigidity of costs is mainly reflected in global expenditures related to licensing applications, audits, and legal compliance. Circle's financial structure has gradually aligned with traditional financial institutions, but its revenue structure, which heavily relies on the spread of U.S. Treasury bonds and trading volume, also implies risks associated with declining interest rates and slowing growth.

The Rise Potential Behind Low Net Profit Margins

Despite the pressure on net profit margins, Circle's business model still hides multiple rise drivers:

1. The circulation of USDC continues to rise, driving reserve income growth, and it is expected that the market value could reach $90 billion by the end of 2025.
2. Optimization of distribution cost structure, such as the customer acquisition cost for units cooperating with Binance being significantly lower than Coinbase.
3. Conservative valuation does not price in market scarcity, as it is the only pure stablecoin asset in the US stock market with premium potential.
4. The market value of stablecoins shows resilience compared to Bitcoin, allowing Circle to have a stronger risk resistance ability during bear markets.

Risks and Challenges

1. The institutional network is no longer a solid moat; asymmetrical profit-sharing agreements and imbalances in channel control may lead to a spiral of rising costs.
2. The progress of the stablecoin legislation may bring localization pressure on reserve assets, resulting in one-time capital migration costs.

Core Advantages and Rise Strategy

1. Market positioning in the compliance era: A regulatory matrix covering the United States, Europe, and Japan has been established.
2. Cross-border payment alternative wave: Launching "USDC instant settlement" service in collaboration with Wise.
3. B2B financial infrastructure: The proportion of USDC settlements in platforms like Stripe is increasing.
4. Emerging market currency substitution and offshore dollar repatriation channels.
5. Deepening RWA asset tokenization and enterprise service suite.

The low net profit margin of Circle is essentially a "scale for profit" strategy chosen proactively during the period of strategic expansion. When the circulation of USDC, the scale of RWA asset management, and the penetration rate of cross-border payments break through, its valuation logic will evolve from "stablecoin issuer" to "digital dollar infrastructure operator." At the intersection of traditional finance and the crypto economy, Circle's IPO is not only a milestone in its own development but also a touchstone for the value reassessment of the entire industry.