USDC stablecoin-issuer Circle (NASDAQ: CRCL) saw revenue rise, but falling interest rates and strategic partner incentives took a bite out of Q2’s profits.
Circle saw its shares spike 10% to nearly $69 early Wednesday ahead of the release of the company’s financial report card for the three months ending June 30. But the shares quickly fell back to earth as investors realized Circle missed its revenue estimates for the quarter. Circle closed the day effectively where it began ($63.38, +0.2%). Since the year began, Circle’s share price has fallen nearly 21% and is down more than 59% over the past 12 months.
Circle’s total ‘revenue and reserve’ income hit $701.3 million in Q2, a slight improvement over Q1’s $694 million and significantly better than Q225’s $658 million. But that revenue figure was ~$12 million below Wall Street’s expectations.
Circle’s primary ‘reserve’ income, aka the interest it receives from the U.S. Treasury bills backing its circulating USDC, rose 2.3% from Q1 to $667.7 million. ‘Other’ revenue, consisting of subscription & services and transactions, came in at just under $33.6 million, down nearly one-fifth from Q1.
‘Distribution and transaction costs,’ aka the incentives Circle offers to third-party platforms—like its USDC partner Coinbase (NASDAQ: COIN) and other centralized exchanges, along with decentralized finance (DeFi) protocols—to prominently feature USDC options, rose 1.2% to $410.4 million.
Net income from continuing operations totaled $48.2 million, down 12.4% from Q1, as operating expenses rose by $12 million to $254.5 million.
USDC claimed a 27% share of the overall dollar-backed stablecoin market cap, one point below Q1’s total. USDC’s market cap stood at $73 billion at the quarter’s end, down from $76.8 billion at the end of Q1. As of Wednesday morning, USDC’s cap was hovering just over $72 billion, reflecting a wider downward trend that hasn’t spared USDC’s main rival, the USDT issued by Tether, which has seen its own cap fall by nearly $7 billion since the end of April.
Circle CEO Jeremy Allaire said the Q2 results “reflect the current [interest] rate environment and a crypto market that has slowed—both are conditions outside our network.” Circle’s reserve return rate was 3.5% in Q2, down 66 basis points year-on-year but unchanged from Q1.
USDC’s on-chain transaction volume hit $14.8 trillion in Q2, averaging $163 billion per day. That quarterly total is up 151% year-on-year, but down nearly one-third from Q1’s $21.5 trillion, with Allaire citing reduced activity by market-makers. Circle says USDC enjoyed a nearly 70% share of stablecoin transaction volume in June, a new record high.
Artemis data showed USDC has a 98% daily turnover over the past 30 days, significantly higher than USDT’s 19%. This supports Circle’s claims that USDC’s primary role is transactions, while USDT offers individuals in emerging markets a means of preserving value as their local fiat currencies depreciate.
Daily turnover was even lower for other dollar-backed stables, including 18% for Ripple Labs’ RLUSD, 12% for both PayPal’s (NASDAQ: PYPL) PYUSD and the Sky Protocol’s (formerly MakerDAO) Sky Dollar (USDS), 11% for Sky’s DAI, and just 7% for the USD1 token issued by the Trump-linked World Liberty Financial (WLF).
Arc gets validators, mainnet launch date
Looking ahead, Circle updated its ‘other’ revenue projections for FY26 to $310-$330 million, up from $150-$170 million. This higher sum includes $242 million from two presale rounds of ARC, the ‘native coordination asset’ (aka token) of the company’s new Layer-1 blockchain of the same name.
Circle has described Arc as its “enterprise-grade, stablecoin-native … economic operating system,” the latest in a series of blockchain firms looking to be a one-stop-everything-for-everyone ecosystem with its hands firmly at the controls.
Circle said Wednesday that Arc is currently in the private mainnet phase, with the public mainnet launch scheduled for September 16. Arc’s testnet phase reportedly witnessed 502 million transactions involving nearly three million wallets.
Circle also announced the “curated set of global financial institutions” that will serve as Arc’s “founding third-party validator cohort.” In April, Circle confirmed that Arc would “ultimately move into a proof-of-stake system over time,” hence the need for validators. If you truly aim to be an ecosystem, you need major players verifying/validating transactions.
Apart from Circle, this illustrious group of validators includes BlackRock (NASDAQ: BLK), Depository Trust and Clearing Corporation (DTCC), Galaxy Digital (TSE: GLXY), Global Payments, New York Stock Exchange parent company Intercontinental Exchange (ICE), Mastercard (NASDAQ: MA), MoneyGram, SBI Group, Standard Chartered (NASDAQ: SCBFF), Sumitomo Corporation (NASDAQ: SMFG), and Visa (NASDAQ: V).
BlackRock is reportedly planning to deploy its BUIDL (BlackRock USD Institutional Digital Liquidity Fund) on Arc, enabling institutional investors to “subscribe, redeem, and deploy fund assets within a single onchain environment.”
DTCC will start tokenizing its custodied assets on Arc in the second half of 2027. The goal here is to allow market participants to “utilize third-party applications on Arc that may enable stablecoin-native settlement outside of DTC [Depository Trust Company] but against DTC-tokenized assets.”
Circle says it’s winning the war for agentic AI payments
In non-USDC developments, the market cap of Circle’s euro-backed stablecoin EURC was up 2.2x from Q225, and while its $453 million cap remains small, EURC remains the largest euro-backed token. EURC is also compliant with the European Union’s new Markets in Crypto Assets (MiCA) regulation, making it one of only three stablecoins on the top-50 market-cap chart to hold this status (USDC being another).
Circle’s USYC tokenized money market fund grew even faster, rising 10x year-on-year to over $3 billion in assets, making it (for the moment) the largest such product in existence.
The Circle Payment Network (CPN) hit $14.7 billion in annualized transaction volume during the final 30 days of Q2, a 76% improvement from Q1’s $8.3 billion. CPN’s list of ‘enrolled’ financial institutions hit 175 by the end of Q2, up 29% from Q1.
On July 31, Circle celebrated its Circle New York Trust unit, receiving a limited purpose trust charter from the New York Department of Financial Services (NYDFS). New York is home to Circle’s global headquarters, and Allaire claimed the charter “has been a longstanding objective for Circle given the regulatory clarity that comes with it.”
Last month, Circle received approval to launch a national trust bank (First National Digital Currency Bank, d/b/a Circle National Trust) from the U.S. Treasury Department’s Office of the Comptroller of the Currency (OCC). Allaire said Wednesday that the new bank “gives leading companies and financial institutions a federally supervised foundation on which to build digital asset services.”
Allaire also celebrated this week’s announcement by internet services firm Cloudflare that its new Cloudflare Wallets will allow AI agents to make x402-based stablecoin payments across Cloudflare’s new Monetization Gateway. While the announcement doesn’t mention USDC by name, Allaire claimed USDC support will be “a core, core part of their offering. [Cloudflare] touch a huge percentage of the internet. So that’s very exciting.”
One analyst noted that USDC currently accounts for the overwhelming bulk of agentic AI transactions and wondered if there was “almost an inherent right to win for you guys within that x402 stack or even a benefit you could get from just more adoption within those payment channels?”
Allaire said that within the agentic space, “agents want actual money … actual digital dollars. They want to know that the infrastructure is something that can process in fractions of a second for fractions of a cent. They want to be able to transact where some of the transactions are as low as just a few cents themselves … all of those things lend themselves extremely well to USDC and to the blockchain infrastructure that we provide and many of our partner networks also provide. And so we absolutely have a right to win and we are clearly winning.”
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During the call, Allaire confirmed last week’s comments by Coinbase execs that the two companies’ USDC strategic partnership has “renewed on its existing terms, ensuring that USDC remain central across all of Coinbase’s products.”
One analyst raised the touchy subject of Coinbase’s support for OUSD, the dollar stablecoin launched by OpenUSD last month. Given OpenUSD’s pledge to share reserve income with its partners, Allaire was asked whether this represented a “structural advantage that Circle can’t replicate given its existing economics with Coinbase.” (Coinbase’s extremely favorable deal with Circle sees the exchange claim as much or more than Circle does from some USDC activity.)
Referencing Coinbase CEO Brian Armstrong’s comments on his own earnings call last week, Allaire said Armstrong “made it very clear his focus is on ensuring that USDC is the number one stablecoin in the world. It’s number one in multiple areas and we want to make it #1 overall. I think we share that.”
Allaire also claimed that many of the blue-chip partners in OUSD’s announcement have “made it very clear in their own earnings calls that they’re taking an agnostic approach, multi-coin, multi-chain, etc.” Allaire added that “around 70% of companies involved in these kind of consortium efforts are already building with us.” Given that OUSD has yet to launch while USDC’s network “is not theoretical or aspirational,” Allaire feels “quite confident in the leadership position that we have.”
Other analysts expressed concern at Coinbase’s announcement in May that it will serve as “the official treasury deployer of USDC” on Hyperliquid, the decentralized exchange on which $5 billion in USDC is currently deployed. The concern is that Coinbase plans to count USDC on Hyperliquid as on Coinbase’s own platform, thereby reducing Circle’s share of revenue generated by these stablecoins.
Allaire chose to paint the deal as further evidence that “we are winning in the market on the basis of the incredible network effects that we’ve already created.” Allaire said Hyperliquid plays “a really key role in what I like to call liquidity supernovas … the liquidity that concentrates on these platforms spins out and affects distribution and availability in so many other places.”
Circle CFO Jeremy Fox-Green clarified that “about 10% of Hyperliquid’s total USDC was within Circle’s platform” at the end of Q2. Fox-Green noted that Coinbase, Circle, and Hyperliquid are “all participating” in this deal, although he declined to comment on how revenue is shared between the three.
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