Author: @BlazingKevin_, the Researcher at Movemaker
At a stage of industry acceleration and elimination, Circle's choice to go public reveals a seemingly contradictory yet imaginative story - with continuously declining net profit margins but still harboring enormous growth potential. On one hand, it possesses high transparency, strong regulatory compliance, and stable reserve income; on the other hand, its profitability appears surprisingly "moderate" - with a net profit margin of only 9.3% in 2024. This apparent "inefficiency" is not due to business model failure, but instead reveals a deeper growth logic: as high-interest dividends gradually fade and distribution cost structures become complex, Circle is building a highly scalable, compliance-first stablecoin infrastructure, with profits strategically "reinvested" in market share expansion and regulatory chips. This article will trace Circle's seven-year journey to going public, delving into its growth potential and capitalization logic behind "low net profit margins" by analyzing the company's governance, business structure, and profit model.
1 Seven-Year IPO Marathon: A History of Crypto Regulatory Evolution
1.1 Paradigm Shift in Three Capitalization Attempts (2018-2025)
Circle's IPO journey can be seen as a living specimen of dynamic negotiation between crypto enterprises and regulatory frameworks. The first IPO probe in 2018 occurred during a period when the SEC's definition of crypto asset properties was ambiguous. At that time, the company formed a "payment + trading" dual-drive model by acquiring Poloniex exchange and secured $110 million in financing from institutions like Bitmain, IDG Capital, and Breyer Capital. However, regulatory doubts about the exchange's compliance and an unexpected bear market caused valuation to plummet 75% from $3 billion to $750 million, exposing early crypto enterprises' fragile business models.
The 2021 SPAC attempt reflected the limitations of regulatory arbitrage thinking. Although merging with Concord Acquisition Corp could bypass traditional IPO's strict review, the SEC's inquiry into stablecoin accounting hit the core issue - requiring Circle to prove USDC should not be classified as a security. This regulatory challenge caused the transaction to fall through but unexpectedly promoted the company's key transformation: divesting non-core assets (selling Poloniex for $150 million to an investment group), and establishing the strategic axis of "stablecoin as a service". From that moment to today, Circle has fully invested in building USDC's compliance and actively applied for regulatory licenses in multiple countries.
The 2025 IPO choice marks the maturity of crypto enterprises' capitalization paths. NYSE listing not only requires meeting Regulation S-K's full disclosure requirements but also undergoing internal control audits under the Sarbanes-Oxley Act. Notably, the S-1 document first comprehensively disclosed reserve fund management mechanisms: of approximately $32 billion in assets, 85% are allocated to overnight reverse repurchase agreements through BlackRock's Circle Reserve Fund, with 15% deposited in systemically important financial institutions like New York Mellon Bank. This transparent operation essentially constructs an equivalent regulatory framework to traditional money market funds.
1.2 Collaboration with Coinbase: From Ecosystem Co-building to Nuanced Relationship
As early as USDC's launch, they collaborated through the Centre Alliance. When the Centre Alliance was established in 2018, Coinbase held 50% equity, quickly opening the market through a "technology export for traffic entry" model. According to Circle's 2024 IPO filing, it acquired the remaining 50% of Centre Consortium's equity from Coinbase for $210 million in stock, and renegotiated the USDC revenue-sharing agreement.
The current revenue-sharing agreement contains dynamically negotiated terms. According to S-1 disclosure, they share USDC reserve income at a certain proportion (with Coinbase sharing approximately 50% of reserve income), and the sharing ratio relates to the USDC volume Coinbase supplies. From Coinbase's public data, the platform held about 20% of total USDC circulation in 2024. By holding 20% of supply and capturing around 55% of reserve income, Coinbase has planted some potential issues for Circle: when USDC expands outside the Coinbase ecosystem, marginal costs will rise non-linearly.
[The translation continues in the same manner for the rest of the document, maintaining the specified translations for specific terms and preserving the original structure.]Distribution expenses surge, compressing gross margin: Circle's distribution and transaction costs have dramatically increased over three years, rising from $287 million in 2022 to $1.01 billion in 2024, a surge of 253%. These costs are primarily used for USDC issuance, redemption, and payment clearing settlement systems, and rigidly grow with the expansion of USDC circulation. Due to the inability to significantly compress these costs, Circle's gross margin rapidly declined from 62.8% in 2022 to 39.7% in 2024. This reflects that while its B2B stablecoin model has scale advantages, it will face systematic profitability compression risks during interest rate downturn cycles.
Profitability turns positive but marginal growth slows: Circle officially turned profitable in 2023, with net profit reaching $268 million and a net profit margin of 18.45%. Although maintaining a profitable trend in 2024, after deducting operating costs and taxes, disposable income was only $101,251,000, and with $54,416,000 in non-operating income, net profit was $155 million, but the net profit margin had dropped to 9.28%, a decrease of about half year-on-year.
Cost rigidity: Notably, the company's General & Administrative expenses in 2024 reached $137 million, a year-on-year increase of 37.1%, growing for three consecutive years. Combined with S-1 disclosure information, these expenses are primarily used for global license applications, audits, and legal compliance team expansion, confirming the cost rigidity brought by its "compliance-first" strategy.
Offshore Dollar Inflow Channel: By exploring tokenized asset projects in collaboration with BlackRock, Circle is converting some offshore dollar deposits into on-chain assets, and the value of this "funding pipeline" is not yet reflected in the current valuation.
RWA Asset Tokenization: After acquiring related technology companies, the launched tokenized asset service has achieved initial management scale, with significant annualized management fee income.
Interest Rate Buffer Period: With the current federal funds rate still at a high level, Circle needs to push circulation to a critical threshold through accelerated internationalization before the rate cut expectations are fully priced, covering the scale effect to offset the impact of interest rate decline.
Regulatory Window Period: Before the final implementation of the Stablecoin Act, leveraging existing compliance advantages to seize institutional clients, signing exclusive settlement agreements with multiple top hedge funds to build exit barriers.
Enterprise Service Suite Deepening: Packaging compliant APIs and on-chain audit tools into a "Web3 Financial Services Cloud", charging SaaS subscription fees to traditional banks, and opening up a second revenue line beyond reserves.
Beneath Circle's low net interest rate appearance is essentially a strategic expansion strategy of "exchanging profits for scale". When USDC circulation breaks through $80 billion, RWA asset management scale, and cross-border payment penetration rate achieve breakthroughs, its valuation logic will undergo a qualitative change - evolving from a "stablecoin issuer" to a "digital dollar infrastructure operator". This requires investors to re-evaluate its monopoly premium brought by network effects from a 3-5 year perspective. At the historic intersection of traditional finance and crypto economy, Circle's IPO is not only a milestone in its own development but also a touchstone for industry-wide value reassessment.
Reference Articles: [links omitted]
About Movemaker
Movemaker is the first official community organization authorized by the Aptos Foundation, jointly initiated by Ankaa and BlockBooster, focusing on promoting the construction and development of the Aptos ecosystem in the Chinese-speaking region. As the official representative of Aptos in the Chinese-speaking area, Movemaker is committed to creating a diverse, open, and prosperous Aptos ecosystem by connecting developers, users, capital, and numerous ecosystem partners.
Disclaimer:
This article/blog is for reference only, representing the author's personal views and not the position of Movemaker. This article does not intend to provide: (i) investment advice or recommendation; (ii) an offer or solicitation to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. Holding digital assets, including stablecoins and Non-Fungible Tokens, is extremely risky with high price volatility and potential total loss of value. You should carefully consider whether trading or holding digital assets is suitable for your financial situation. For specific questions, please consult your legal, tax, or investment advisor. The information provided in this article (including market data and statistics, if any) is for general reference only. Reasonable care has been taken in compiling these data and charts, but no responsibility is accepted for any factual errors or omissions.
