Original source: Fintech Blueprint
Compiled and edited by: BitpushNews
Yesterday, the U.S. Securities and Exchange Commission (SEC) released its latest 13F filing. Duan Yongping, often referred to as "China's Buffett," quietly made a significant portfolio adjustment to his family fortune and charitable foundation account, H&H International Investment LLC, which manages over $20 billion. For the first time ever, he established a position in the compliant stablecoin giant Circle (US stock code: CRCL), with a holding value of $19.08 million.
As a staunch value investor, Duan Yongping rose to fame for his heavy investments in Apple and Kweichow Moutai. His investment philosophy has always been "don't invest in what you don't understand." This investment in Circle not only signifies the formal acceptance of Web3 compliant assets by traditional, established capital, but this article will also provide an in-depth analysis of Circle's Q1 performance and latest product developments, exploring whether this stablecoin giant can successfully shift its business model from "interest-driven" to "infrastructure" through the restructuring of its underlying architecture.
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Circle had a busy week.
Along with the release of its Q1 2026 results—total revenue and reserve interest income approaching $700 million (a 20% year-over-year increase), USDC circulation reaching $77 billion, and on-chain transaction volume reaching $21.5 trillion—the company also dropped two major product announcements and completed a $222 million token presale.
Change the label of "interest rate voucher"
Circle has long been labeled an "interest rate proxy": 99% of its 2024 revenue came from interest earned on USDC reserve assets.
This makes the business extremely sensitive to interest rate cycles, leaving equity investors with almost no other basis for valuation and pricing besides interest rate spreads and the growth in USDC issuance. Arc (its Layer-1 blockchain), the Circle Agent Stack, and the Payments Network are Circle's concentrated attempts to change this situation—aiming to diversify revenue and revalue stocks based on "yield multiples" rather than "underlying architecture multiples."
Perhaps most unusually, Circle, a publicly traded company with a traditional equity structure, raised $222 million through a token presale for its new Layer-1 blockchain focused on stablecoins, achieving a fully diluted valuation (FDV) of $3 billion.
In the financial world, some instruments are listed on the regular shareholder register (Cap Table), while others are tokens for specific protocols. It's worth noting that Coinbase's Ethereum L2 network, Base, has yet to issue its own token. For a publicly traded company with a market capitalization of billions of dollars to complete such a token financing round signifies that the token asset has officially entered Wall Street.
This funding round was led by Andreessen Horowitz (a16z), which committed $75 million, with participation from BlackRock and Apollo. The pre-sale includes a multi-year lock-up period; investors also have a right to repayment if Arc Network fails to meet key milestones.
Circle holds 25% of the initial supply of 10 billion tokens, with 60% allocated to network participants and 15% reserved as a long-term reserve. The Mainnet is expected to launch in the summer of 2026, and as of early May, its testnet had processed 244 million transactions.
Currently, the utility of the ARC token is still in the exploratory stage. This means that even without well-designed token economics, you could still raise over $200 million today. Moreover, if we look closely, we'll find that building a Layer-1 blockchain actually doesn't require $200 million at all.
Along with Arc, Circle also announced the Circle Agent Stack—a toolkit for developers to build AI agents that transact using USDC, including wallets, marketplaces, and a nanopayments layer that supports transfers as low as $0.000001.
The company thus joins Stripe, Coinbase, Visa, Mastercard, Shopify, Fiserv, and Brex in this rally of "banking for bots".
Arc is a defensive war
Today, USDC runs on dozens of public blockchains and wallets, including Ethereum and Solana. Circle can earn interest income from all these reserve assets. But the question is, how much of that income actually stays in its own pocket?
According to the "Cooperation Agreement" signed with Coinbase in 2023 (which was signed when the Centre Alliance was dissolved, at which time Coinbase, as Circle's largest distribution channel, had significant negotiating power), the distribution of reserve interest income was divided into three steps:
- Circle first extracts a small issuer fee at the top level.
- Subsequently, both parties will receive corresponding reserve interest income based on the proportion of USDC held in their respective custodial products.
- As for all the remaining profits, Coinbase takes 50% directly.
As a result, even if some USDC has no custody relationship with Coinbase, Coinbase can still extract a portion of the reserve interest income from it.
In 2024, Circle ceded a staggering $908 million of its total revenue of $1.68 billion to Coinbase. This agreement automatically renews every three years, and Circle has no right to unilaterally withdraw. Therefore, Arc is, in a sense, Circle's effort to build an underlying architecture that it completely controls and directly earns fees from.
To reiterate: Coinbase has a net 50% cut of almost all of Circle's revenue, and Circle has no way to escape except by finding a clever "backdoor".
Arc's customer acquisition logic is very straightforward: a Layer-1 blockchain specifically designed for native stablecoin finance. It uses USDC as its gas token and features sub-second transaction finality, optional privacy protection, EVM (Ethereum Virtual Machine) compatibility, and a quantum-resistant architecture. For institutions whose business revolves around fund transfers, this represents a new generation of settlement infrastructure and an alternative to ACH, SWIFT, and correspondent banking.
Launched in October 2025, the testnet has already attracted more than 100 institutional participants, including BlackRock, Goldman Sachs, Visa, and State Street, and has processed 244 million transactions.
However, to be fair, similar organizations have previously joined Tempo and various AI payment and smart agent protocols that we've reported on in the past. This indicates that the industry is moving towards diversification in the process of restructuring the payment landscape.
In contrast, the $3 billion fully diluted valuation (FDV) pegged to the pre-sale seems somewhat unconvincing. This is because the functionality of the ARC token is still in the exploratory stage. What investors are currently betting on is the option value of Circle possessing a "stablecoin settlement mother chain"—thereby closing the entire vertical ecosystem and plugging the current loopholes in value leakage to third parties. Whether this option is worth $3 billion depends on future trading volume. Specifically, it depends on whether Circle can migrate a sufficient share of its current $77 billion circulating supply to Arc, thereby generating enough service fee revenue to support that valuation.
At the same time, the regulatory context has exacerbated this sense of urgency.
The GENIUS Act, signed into law in July 2025, explicitly paves the way for banks to issue their own payment stablecoins through subsidiaries, subject to oversight by their existing federal regulators. JPMorgan and the Bank of New York are already piloting tokenized deposits. Once regulated bank-backed dollar tokens reach a certain scale, market demand for third-party stablecoin issuers like Circle will likely diminish.
Arc cannot directly solve this problem, but having its own on-chain infrastructure can create network effects and reduce switching costs. This serves as a safeguard against the risk of everyone from Canton to Ripple, and even JPMorgan's Kinexys, trying to carve up profits or vertically integrate.
The Circle Agent Stack is an offensive war.
Agent Stack is a developer toolkit for building AI agents that can transact using USDC. It consists of a wallet, a marketplace, and a nano-payment layer capable of transactions as small as $0.000001. The core logic is that as AI agents autonomously undertake more operational and financial tasks, the transaction scale and granularity they require will be unsustainable by existing payment infrastructures (such as bank card networks, ACH, SWIFT, etc.) due to their high fixed costs (existing networks make transactions as small as a cent economically infeasible). A native USDC chain supporting programmable micropayments eliminates this cost floor. Currently, there is no perfect solution for an AI agent that needs to be charged based on the number of API calls, computation seconds, or data queries.
Ramp launched Agent Cards in March 2026. In short, it allows businesses to issue virtual cards for autonomous agents' spending. Stripe, after acquiring Bridge at the end of 2024, also has its own answer: issuing agent-specific cards through Bridge, providing wallet infrastructure through Privy, and supporting stablecoin payment acquiring in 32 markets.
- Ramp's Agent Cards: Built specifically for enterprise expense control.
- Circle's Agent Stack: Native micropayments for USDC on the Arc Chain.
- Stripe positions itself as a full-stack layer (providing fiat currency, stablecoin, and wallet underlying architecture under a single API).
The showdown between Circle and Stripe
Circle's structural advantage lies in the assets themselves.
USDC is the dominant compliant stablecoin and has become the unit of account for a large portion of on-chain activities. Stripe's Bridge, on the other hand, issues its own stablecoin through "Open Issuance." USDH, one of Bridge's flagship issuances, was shut down this week because it couldn't compete with USDC's $5 billion market capitalization on Hyperliquid. Coinbase then stepped in to become the official USDC treasury deployer. Building a smart agent architecture on top of USDC means that smart agents can inherit existing liquidity and network depth from day one. This asset advantage has proven to be far more difficult to replicate than it appears.
As mentioned earlier, Stripe also incubated Tempo—a Layer-1 blockchain specifically tailored for payments. However, Tempo is positioned to support universal payment settlement for any stablecoin, while Arc is built entirely around USDC. Both companies are betting that the future of payments will clear out on customized, proprietary chains, rather than on general-purpose chains like Ethereum.
The differences in capital structure are also noteworthy. Circle raised $222 million ($3 billion FDV) for Arc through a pre-sale. Stripe, on the other hand, is a privately held, consistently profitable company with a latest valuation of $70 billion—it can fully fund the expansion of Tempo and Bridge using the cash on its balance sheet without diluting its equity through tokens.
The two companies have fundamentally different approaches to absorbing and subsidizing the costs of a new blockchain ecosystem.
Ultimately, the capabilities and inclinations of "payment processors (like Stripe)" and "issuers of cash equivalent financial instruments (like Circle)" are fundamentally different. The former excels at distribution and boasts a vast ecosystem of merchants and customers; the latter holds assets in every exchange and crypto wallet. We believe that blindly pursuing vertical integration and getting caught up in an expensive arms race would be a mistake.
Arithmetic problems in the income ledger
Circle's business model today is simple: $77 billion in USDC is in circulation, earning a return of approximately 4.1% on reserve assets, a significant portion of which flows to Coinbase under a distribution agreement. Its total revenue for 2025 is projected to be $2.75 billion.
Analysts predict revenue of approximately $3.2 billion in 2026, implying growth of about 15%. This figure is rather modest compared to last year's 64% growth, reflecting two real headwinds:
- Lower interest rates have compressed the yields on reserve assets;
- The GENIUS Act restricts how reserve revenue can be shared with distribution partners, subjecting the partnership agreement with Coinbase to regulatory scrutiny.
New products must be understood within this context. Circle projects non-reserve revenue of $150 million to $170 million in 2026, up from $110 million in 2025, but still less than 6% of total revenue. Arc's transaction fees, Agent Stack developer revenue, and CPN (Circle Payment Network) fees are currently in very early stages. To achieve a valuation reassessment from "interest rate proxy tool" to "underlying architecture platform," these business lines need not only absolute growth but also substantial increases in their revenue share. Based on the current trajectory, Circle's story is unfolding faster than its financial figures suggest.
Stock price movements also reflect this tug-of-war. CRCL, which IPO'd at $31 in June 2025, briefly surged to nearly $300 before falling back and stabilizing around $114. Following its first-quarter earnings report, JPMorgan Chase raised its price target to $155, Needham to $150, and Deutsche Bank to $101. Market consensus expectations remain between $125 and $130, implying very limited upside potential from current levels.
Bullish and bearish
A bullish outlook requires three conditions to be met simultaneously:
- The circulation of USDC is growing fast enough to offset the impact of declining reserve yields;
- Arc is able to generate substantial fee revenue and partially replace or eliminate its partnership agreement with Coinbase;
- Agent Stack was able to establish its position as the underlying architecture in the field of smart agent payments before Stripe could overwhelm it with its sheer size.
If all three conditions are met, Circle will successfully transform into a payments infrastructure company, with its valuation multiplier driven by transaction volume and network effects, rather than by the Federal Reserve's interest rate cycle.
The logic for a bearish outlook is much simpler:
Interest rates fell faster than circulation grew; the agreement with Coinbase reduced distribution channels during restructuring but failed to effectively compensate for trading volume; Arc was unable to migrate a sufficient amount of USDC to its own chain; Stripe or Ramp launched better smart agent infrastructure at a lower cost, completing the encirclement of Circle.
Circle's announcements are undoubtedly strategically sound moves. However, at present, they are merely chips and stakes, not yet transformed into a true business. Circle is asking investors to pay for the value of these three simultaneously vesting options, while its core business model faces real structural headwinds. This demand isn't unreasonable—it just seems a bit expensive at the current valuation level.
