The amount of USDC held on the Coinbase platform directly affects its revenue-sharing ratio from Circle, as Coinbase is the largest distribution partner of USDC.
Author: Sebastian Sinclair
Translation: Deep Tide TechFlow
Circle CEO Jeremy Allaire speaking at Converge 2022
Image source: Nikhilesh De/CoinDesk (CC BY 2.0)
According to Circle's latest IPO filing, Coinbase receives half of the remaining revenue from Circle's USDC reserves, further deepening the connection between the two crypto giants.
Documents submitted on Tuesday show that Coinbase receives 50% of the "residual payment base"—this portion of revenue explicitly comes from the reserves backing Circle's flagship stablecoin (USDC) at a 1:1 parity with the US dollar.
Circle's revenue primarily comes from reserve assets, which are essentially composed of highly liquid U.S. Treasury securities and cash equivalents.
In 2024, Circle's total revenue and reserve earnings reached $1.7 billion, reporting a net income of $156 million. Circle stated that it is committed to seizing the growing opportunities in global blockchain payments to further expand its business.
Symbiotic Relationship: The Deep Binding of USDC and Coinbase
The documents indicate that the proportion of revenue Coinbase receives from Circle's reserves is directly related to the amount of USDC held on the Coinbase platform.
If more USDC is stored on the Coinbase platform, the exchange's share of reserve income will increase; conversely, if users hold USDC directly through Circle or other platforms, Coinbase's share of income will decrease.
This revenue-sharing agreement further emphasizes a point well-known among industry insiders—the symbiotic relationship between Circle's USDC and Coinbase. As the largest distribution partner of USDC, Coinbase has a significant impact on Circle's revenue stream.
USDC is the second-largest stablecoin globally, with a circulation of approximately $60.1 billion, accounting for about 26% of the global stablecoin market (data source: CoinGecko).
The stablecoin was jointly launched by Circle and Coinbase in 2018 through the Centre consortium, and after the consortium was dissolved in 2023, Coinbase acquired equity in Circle in August of the same year.
In 2024, the amount of USDC held on the Coinbase platform accounted for about 20% of the total circulation, a significant increase from 5% in 2022, reflecting Coinbase's growing importance to Circle's revenue stream.
Despite the close partnership, Circle also pointed out in the documents that this arrangement may pose potential risks. Circle emphasized that its distribution costs and the revenue share paid to Coinbase are directly influenced by Coinbase's business strategies and policies, which are beyond Circle's control.
To reduce its reliance on Coinbase while competing globally against its main competitor Tether (USDT), Circle is accelerating the international expansion of USDC. The company has recently partnered with several digital finance giants, including Grab in Singapore, Nubank in Brazil, and Mercado Libre in Latin America.
Circle plans to list on the New York Stock Exchange under the ticker symbol "CRCL," but has not yet disclosed pricing details or the issuance date.
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