The issuer of the world's second-largest stablecoin, USDC, Circle, has officially launched its IPO plan, preparing to list on the New York Stock Exchange. On April 2, the company submitted its prospectus to the SEC, taking the first anticipated step towards its IPO. The S-1 document does not specify an IPO timeline, but companies typically can begin trading within weeks of filing an S-1. According to the S-1 prospectus, JPMorgan and Citigroup will serve as lead underwriters, with market expectations of Circle's valuation potentially reaching $5 billion, with the stock ticker "CRCL". The prospectus indicates that Circle will issue an unspecified number of Class A common shares, with existing shareholders also registering to sell some of their holdings. The per-share pricing range has not yet been determined. Proceeds from the company's stock sales will belong to Circle, while proceeds from existing shareholders' sales will not be included in the company's funds.

In the same year, the company recorded a digital asset impairment loss of $4.3 million and received $54.4 million in other income from non-core business earnings. The prospectus has not yet finalized the weighted average number of circulating shares and earnings per share.

According to the plan, Circle intends to use IPO fundraising for product R&D, operating capital, scale expansion, and potential acquisitions, among other regular corporate purposes. The specific pricing timeline and share allocation plan have not yet been announced.

Operational and Financial Metrics

Circle earns money by managing USDC's reserve assets. These reserves include cash and short-term U.S. Treasury securities, generating significant interest income in a high-interest-rate environment. The S-1 shows that Circle's total revenue in 2024 was $1.68 billion, with 99% (approximately $1.665 billion) coming from reserve income, while other sources (such as payment services and cross-chain technology) contributed only $15 million. This means Circle is almost entirely dependent on a single income source and is affected by government interest rate policies. The document estimates that a 1% decrease in interest rates would reduce reserve income by $441 million. However, Circle believes that low interest rates might stimulate USDC circulation growth, but this relationship is "complex, uncertain, and unproven".

As of December 31, 2024, USDC was used in approximately $20 trillion of on-chain transactions. The table below shows key operational and financial indicators during the specified period, along with related GAAP (Generally Accepted Accounting Principles) measurements:

USDC circulation and average USDC circulation are the main contributors to Circle's reserve income and indicators of the breadth of Circle's stablecoin ecosystem. As of December 31, 2024, 2023, and 2022, the company held USDC of $294.5 million, $275.8 million, and $5.3 million, respectively.

The Reserve Return Rate refers to the return rate of reserve assets, which is the primary determinant of reserve income, calculated by dividing reserve income by the average period balance of Circle's stablecoin-specific reserves. As of December 31, 2024, 2023, and 2022, the company's reserve return rates were 5.0%, 4.7%, and 1.5%, respectively.

Stablecoin Market Share refers to the proportion of Circle's stablecoins in circulation relative to the total circulation of fiat-backed stablecoins (digital assets anchored to fiat currency value). This indicator reflects Circle's share in the stablecoin market and its position in the competitive landscape. Since 2021, Circle has been the world's second-largest stablecoin issuer by circulation. According to CoinMarketCap data, Circle's stablecoin market share was 24% as of December 31, 2024.

Meaningful Wallets refers to the number of digital asset wallets with a USDC balance exceeding $10, which is an important indicator of USDC adoption breadth. In 2024, the number of meaningful wallets was 4.26 million, a 53.24% increase from the end of 2023.

Profit Breakdown

The table below shows Circle's 2024 income statement, detailing the company's income, expenses, and net profit indicators for 2024:

As of December 31, 2024, reserve income was $1.676 billion, a year-on-year increase of $230.5 million (16.1%) compared to 2023. Approximately $139.9 million of the growth came from the increase in average daily USDC balance in circulation, reflecting increased USDC demand related to digital asset trading activity and Circle's improved market share in key markets; $89.9 million of growth came from improved average yield, primarily due to Federal Reserve interest rate hikes. Other income for the year decreased by $4.7 million (23.6%) year-on-year, mainly due to a $3.9 million decline in transaction service income, which was related to the gradual discontinuation of certain services in 2024.

Distribution and transaction costs for 2024 increased by $291 million (40.4%) compared to the end of 2023, primarily due to a $216.6 million increase in distribution costs paid to Coinbase and a $74.1 million increase in other distribution incentive costs related to new strategic distribution partnerships, such as a one-time prepaid fee to Binance. Other expenses for the year decreased by $1.4 million (17.2%) compared to 2023, mainly due to the discontinuation of traditional transaction service products, resulting in a $900,000 reduction in related expenses.

The annual profit for 2024 was $156 million, a decrease of $112 million from the net income in 2023. Despite a year-on-year increase of $230.5 million in reserve income compared to 2023, distribution and transaction costs also significantly increased by $291 million compared to the end of 2023, with total operating expenses increasing by $39 million, ultimately leading to a downward trend in profits.

In terms of cash flow, for three consecutive years from 2022 to 2024, the USDC reserve cash balance in bank accounts far exceeded the FDIC insurance limit of $250,000 per financial institution. As of December 31, 2024, approximately 85% of USDC reserves were held in the Circle Reserve Fund, with the remainder held in cash across several bank accounts. The Circle Reserve Fund is managed by BlackRock. The fund is only available to Circle, and Circle is the sole shareholder of the Circle Reserve Fund.

In terms of financing, in 2024, financing proceeds were $19.4499 billion, while financing proceeds in 2023 were -$20.3222 billion, mainly due to a net change of $19.4521 billion in stablecoin holder deposits in 2024 with increased USDC in circulation, compared to a net change of -$20.3222 billion in stablecoin holder deposits in 2023 with decreased USDC in circulation.

High Compensation Questioned, Are Executives the Real Winners of the IPO?

Circle's IPO is not just about the company's future but also a capital feast. After going public, Circle will implement a three-tier equity structure: IPO-issued Class A shares with 1 vote per share; Class B shares held by co-founders Jeremy Allaire and Patrick Sean Neville with 5 votes per share, but with total voting rights not exceeding 30%; Class C shares with no voting rights, convertible under specific conditions. Class B shares will automatically convert to Class A shares when transferred through non-permitted channels.

Additionally, according to the prospectus, CEO Jeremy Allaire's compensation includes a $900,000 annual salary, $9 million in stock awards, and $2 million in benefits, totaling over $12 million. Chief Financial Officer Jeremy Fox-Geen's total compensation is $5.2 million ($500,000 salary + $4 million in stock + $700,000 in benefits). Other executives like Chief Strategy Officer Elisabeth Carpenter, President and Chief Legal Officer Heath Tarbert, and Chief Product and Technology Officer Nikhil Chandhok have annual compensation between $4 million and $5 million. Working at Circle is clearly lucrative.

For venture capital giants, investors holding more than 5% of shares will make a significant profit, including General Catalyst (the largest corporate shareholder), Beijing IDG Capital, Breyer Capital, Accel, Oak Investment Partners, and Fidelity. These institutions collectively hold over 130 million shares, and an IPO valued at $4-5 billion will bring them substantial returns.

USDC's market value has doubled in the past year, from around $30 billion to $60 billion, but market competition is increasingly fierce. The main competitor, Tether (USDT), leads with a market value of over $140 billion. Moreover, PayPal launched its own stablecoin in 2023, and banking giants like JPMorgan are exploring the blockchain field. In the S-1 document, Circle lists these competitors, candidly acknowledging the complex market environment.

Despite this, Circle remains optimistic about the future. The legislative process for stablecoins in the United States is accelerating, with the GENIUS Act and STABLE Act drawing significant attention. Bryan Steil, chairman of the House Digital Assets Subcommittee, stated that after the April 2nd review, both bills are expected to be reconciled and planned to be sent to the president for signature within the first 100 days of the Trump administration. This progress provides policy benefits for compliant stablecoin companies like Circle and marks an increasingly clear regulatory framework for digital dollars in the United States.

This IPO still needs to pass regulatory review and proceed based on market conditions, with specific details such as issuance scale and per-share valuation to be disclosed through supplementary documents before listing. Although uncertainties remain, Circle's IPO is likely to be a key signal for the future of the stablecoin industry. As global regulatory policies become increasingly clear, stablecoins are moving towards compliance and deep institutional participation. Can Circle seize this opportunity and challenge Tether's long-standing dominance by leveraging the abundant capital flow brought by Wall Street? Under multiple challenges of regulation, competition, and market volatility, can Circle meet market expectations? Only time will tell.

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